Advanced Environmental Recycling Technologies, Inc

Transcription

Wakabayashi Fund LLC presents
Symbol: AERT.OB
914 N Jefferson
Springdale, Arkansas 72763
Tel: (479) 756-7400
Tel: 1-800-951-5117
Fax: (479) 756-7410
Website: www.aertinc.com
2
Advanced Environmental Recycling Technologies, Inc. (AERT)
We would like to introduce our latest client, Advanced Environmental Recycling
Technologies, Inc. (AERT), a public company founded in 1988 and based in Springdale,
Arkansas. AERT develops and commercializes technologies to recycle waste
polyethylene plastics and develops, manufactures, and markets value added, green
building compounds. The Company operates manufacturing facilities in Springdale and
Lowell, Arkansas and recently commenced operations at its new Green Age plastic
recycling facility in Watts, Oklahoma. AERT is a leading manufacturer of non‐wood
alternative products in the U.S., using proprietary processes that combine waste wood
fibers and recycled polyethylene. Products AERT manufactures from the conversion of
reclaimed plastic and wood fiber waste include quality outdoor decking systems, fence
systems, as well as door and window components with ChoiceDek® and
MoistureShield® being AERT’s primary products. With the Watts facility, AERT will
soon be entering the recycled polyethylene resin business with additional sales to
third parties.
ChoiceDek®
ChoiceDek is Lowe’s Exclusive in‐house brand of composite decking manufactured by
AERT. This high quality wood/plastic composite uses over 90% recycled materials.
The Company uses it unique and proprietary manufacturing technology to create the
industry’s only fully encapsulated lifetime composite. ChoiceDek can be used in a wide
range of conditions including applications that require ground contact, masonry
contact, and constant contact with moisture. ChoiceDek is perfect for Do‐It‐Yourself
jobs because it is easily customizable. ChoiceDek’s medium density allows for
installation without the need for pre‐drilling which is an example of its installer
friendly characteristics. ChoiceDek has been sold in Lowe's stores since 1997.The
website is http://www.choicedek.com .
MoistureShield®
MoistureShield is an alternative decking product targeted toward the professional
contractor market. It is sold by 42 regional distributors throughout the U.S., Canada,
and internationally. Besides decking products, AERT also offers MoistureShield
composite wood for door and window application, and exterior trim and fascia
products in multiple colors.
Plastics
The management team at AERT brings together expertise in manufacturing,
engineering, chemistry, business and financial management that puts the Company at
the forefront of the industry. The combined knowledge and experience gives AERT the
tools to continue creating unique innovative technology.
Recycled Polyethylene/Green Building Compounds
AERT began recycling polyethylene plastic in 1988. Polyethylene plastic is used in food
and beverage packaging and consumer and industrial applications and is the largest
component of the U.S. plastic waste stream. It also has a wide range of properties for
many specific end use applications. Thus, in most municipal or material recovery
facilities (MRF), a broad range of plastic materials and colors present a huge variation
of low quality material of which, in the U.S. over 93% winds up in landfills (U.S. EPA).
Advanced Environmental
Recycling Technologies, Inc
914 N Jefferson
Springdale, Arkansas 72763
Tel: (479) 756-7400
Tel: 1-800-951-5117
Fax: (479) 756-7410
Website: www.aertinc.com
OTC Market Tier: OTCQB
Symbol: AERT
CIK: 0000849706
52 Week High: $0.50
52 Week Low: $0.25
Market Cap: 15.42M
Out. Shares: 49.74M
Float: 34.066 M
EBITDA (ttm): 10.97M
Fiscal Year End: 12/31
Management:
Joe Brooks – Chairman/CEO
Tim Morrison – President
Steve Brooks – COO
Brian Hanna – CFO
Legal:
Akin Gump Strauss Hauer & Feld
LLP
Accounting:
Hogan Taylor LLP
Transfer Agent:
American Stock Transfer & Trust
Company, LLC
SEC Filings:
10-K/A (4/30/10)
10-K (3/26/10)
Recent News:
AERT Hosts North American
MoistureShield(R) Customers
(10/25/10)
Sponsorship:
Wakabayashi Fund LLC
www.wakabayashifund.com
3
AERT has initially utilized these low grades of polyethylene in its composites business by combining it with large
amounts of wood fillers. Over time the company has continued to refine and improve its technologies and processes
even with the run up in petrochemical prices in 2006‐2008 AERT accelerated this program and commercialized its new
Resin Identification and Reformulation Technologies at which point AERT commenced building its Watts, OK Green Age
facility to clean and wash these low end plastic materials; thereafter blend and reformulate them back to desired end
product or customer specifications. With these programs now completing the initial stages, commercialization of
reformulating recycled resins allows AERT to offer green compounds to third party manufacturers of existing value
added products.
AERT currently recycles plastics from several of the country’s and world’s largest retailers and protein providers with
AERT technologies and facilities. These materials can be reprocessed, reformulated and sold back to these companies
existing vendors and suppliers for green compounds to achieve ever increasing Sustainability Initiatives. AERT sees a
huge opportunity in the near future to become the premier supplier of recycled polyethylene green compounds.
Advanced Environmental Recycling Technologies, Inc. is seeking to raise $10M USD for expansion and working capital.
We are currently presenting Advanced Environmental Recycling Technologies, Inc to the professional investment
community. If there is any interest on your part, we would be pleased to provide you with more comprehensive
information on the company for your review and consideration. Thank you for your interest and I will plan to follow up
with you in the very near future.
Most sincerely,
Tadaharu Wakabayashi
Chairman, Co‐Founder, Director
Wakabayashi Fund LLC
4‐13‐20 Mita Minato‐Ku Tokyo Japan 108‐0073
T: 81.03.6657.8339 JP T: 01.914.613.3002 US
E: [email protected]
4
Executive Summary
Advanced Environmental Recycling Technologies, Inc. (“AERT” or “Company”), is a public company that develops and
commercializes green technologies that transforms waste recycled plastics into value added compounds and materials.
AERT was one of the first polyethylene plastic recyclers, founded in 1988 after 3 years of research and development by
the Brooks Group. The Company is a leading manufacturer of composite decking, railing and related materials in the
United States having sold over $750M USD in composite building materials since it first began. AERT is the recipient of
the United States EPA Environmental Excellence award as well as numerous other recognitions.
AERT History
The Brooks family developed a new series of technologies for combining recycled wood fiber and recycled polyethylene
plastic to form a highly durable, non‐toxic, termite resistant engineered composite building material that is used in the
building trades. The new composite was initially used to replace high weather impacted wood components such as door
rails, door subsills, and windowsills. Subsequently, the new composites were used for applications in decking and
exterior trim and facia applications.
AERT’s initial manufacturing facility was opened in 1989 just outside of Junction, Texas. For decades that area had been
known for its production of cedar oil that is used in furniture polish and many other applications. A byproduct of cedar
oil production is spent cedar fiber that often had to be disposed. AERT located its first manufacturing plant near several
of the cedar oil mills to take advantage of the abundant supply of cedar fiber.
The initial products manufactured at the Junction, Texas plant won wide acclaim for their durability, far surpassing
conventional wood in their ability to withstand the ravages of rot, termites, and harsh environments. The cedar aroma of
the products manufactured at the Junction facility was also a big hit with customers.
In 1989, AERT became one of the first plastic recycling companies to successfully complete an Initial Public Offering of
stock and became listed on the NASDAQ exchange (AERT).
In 1990, AERT introduced the MoistureShield® line of door and window components. These highly functional
components have been incorporated into millions of doors and windows by manufacturers like Therma-Tru, Crestline,
Vetter, Premdor and many others. The door and window component market is highly competitive and requires exacting
specifications. Only the most stable and durable composites can qualify for this use. AERT is pleased that its
MoistureShield® products have been used in many of the nation’s most prestigious homes.
The Company began activities at its Plastics Reclamation facility in 1990. Since that time, AERT has further developed
and patented its proprietary waste plastics reclamation technologies which allow it to recover waste plastics from the
by‐product of other recycling operations, as well as post‐consumer and post‐industrial waste streams.
AERT entered into a joint development agreement with the Dow Chemical Company of Midland, Michigan in 1991 for
the purpose of developing polyethylene film recycling technology. As a result of this agreement, AERT was able to
develop new approaches to polyethylene film recycling and gain a clearer understanding of the unique opportunities it
had in composite manufacturing. This project was funded by Dow in addition to assistance from the state of Arkansas
under then Governor Bill Clinton.
In 1991, AERT was featured on CNN’s Science and Technology segment as a promising new technology company. AERT’s
patented technology for recycling polyethylene and wood drew a great deal of attention for its functionality in recycling
waste materials into new products with significantly more utility and life expectancy than the products they were
replacing.
AERT History
AERT has been awarded a series of patents relating to the technology for manufacturing wood and polyethylene
composites. In 1998, the United States Patent and Trademark Office awarded AERT with U.S. Patent No 5759680 for the
extruded composite material used exclusively by AERT to manufacture its high quality building products.
AERT began manufacturing decking systems in 1992 which were marketed under the trade names LifeCycle™. In that
same year, AERT provided the decking material for the South Padre Island Convention Center Board Walk, which was
the Company’s first high visibility public walkway.
In 1995, AERT chose Weyerhaeuser as its national distribution and marketing partner for decking and accessories.
Weyerhaeuser selected the name ChoiceDek® to apply to the decking products manufactured for it by AERT. Since that
time, Weyerhaeuser ChoiceDek® has become a leading name in the composite decking industry. The association
between AERT and Weyerhaeuser continued to grow over the years enabling both companies to participate in building
an exciting future that neither would have been able to experience alone.
Since its inception, AERT has been dedicated to making superior products with lower environmental impacts and using
recycled materials. AERT’s commitment to satisfying customer needs and protecting the environment has won it
recognition from many sources. In 1991, the state of Arkansas, under Governor Bill Clinton, awarded AERT a low
interest loan to expand its plastic recycling capabilities in Rogers, AR. In 1995, Texas Governor, George W. Bush
appointed Joe G. Brooks, Chairman of the Board for AERT, to the Clean Texas 2000 Board. By 1998, AERT had become
one of the larger polyethylene and wood recyclers in the U.S. In 2009 former President Bill Clinton appointed Joe Brooks
to the international sustainability team focused on rebuilding Haiti.
In recognition of the advancements that AERT had made in recycling technology and market development for recycled
products, the U.S. Environmental Protection Agency awarded AERT’s Junction, Texas manufacturing facility with the U.S.
EPA, Region 6 Environmental Excellence Award. This award is proudly displayed at the company’s corporate
headquarters.
Growth in the company’s core business areas and development of significant markets for its products on both the east
coast and the west coast led to opening a new manufacturing plant with railroad access in 1997. After an extended
search and considerable evaluation, it was determined that the new plant should be located in Springdale, Arkansas. The
new plant could more easily service the company’s growing customer base and could take advantage of lower
transportation cost for both raw materials and finished products.
Springdale is located in northwest Arkansas and is surrounded by the Ozark Mountains. The area is known for its
hardwood forests and has become the home for a wide variety of wood manufacturing businesses. A vast supply of
premium grade, residual hardwood oak fiber is available from local wood manufacturing and forestry businesses. Since
the Springdale manufacturing plant opened, it has been responsible for recycling over 100 million pounds of this
residual wood waste that would have otherwise gone to local landfills for disposal.
In 2003, AERT opened a plastic recycling and warehousing facility at Lowell, AR, allowing the company greater flexibility
in processing secondary plastics and preparing them for use as raw materials at both the Springdale and Junction
manufacturing plants. The plastic processing and warehousing function has continued to grow with the recent addition
of the Watts, OK facility. Additional, plastic processing capacity is being planned and will be opened in the near future. In
2010, the manufacturing equipment from the Junction, TX facility is being relocated to Springdale, AR with financial
assistance from the state of Arkansas. The company intends to sell its original Texas facility in the near future.
In May 2001, the National Evaluation Services, Inc. completed its review of Weyerhaeuser ChoiceDek® and issued
National Evaluation Report # 596, which includes decking, stair and handrail uses. The National Evaluation Services is
5
6
recognized widely by building code officials as the authoritative voice for safety and reliability in building materials.
Today AERT Building Products are covered under code report ESR 2388.
In 2002 AERT and Weyerhaeuser entered into a long‐term strategic alliance with Lowe’s Home Improvement
Warehouse for the exclusive rights to market ChoiceDek® Premium into the North American home improvement
warehouse market. Lowe’s is the first major home improvement warehouse to make a national commitment to a
composite decking product.
In 2003 AERT opened plastic processing plants in Lowell, Arkansas and Alexandria, Louisiana. The added raw material
processing capacity provided AERT with a new dimension in cost and quality control. Increasingly through 2004, the
new raw materials processing capacity made a positive impact on quality, productivity and profitability. In 2008, the
Alexandria, LA plant equipment was merged into Lowell, AR. Productivity is reaching record levels as more precisely
refined raw materials are being provided to the extrusion plants and gearing up for other applications.
New automated finishing lines were added at the Springdale, Arkansas extrusion plant in 2003. These lines were
constructed to handle the high volume of new decking products, including embossed and colored decking, that have
been developed by AERT.
A new bond financing was completed in 2003 with Allstate Investments that provided much needed capital for financial
expansion of the company's Springdale, AR facility.
In May 2007, AERT added a new extrusion facility called Springdale South. Springdale South's extrusion facility houses
the company's newest and largest wood/plastic composite extrusion line, which incorporates several innovations and
technologies designed to increase throughput, improve operation efficiency, and reduce manufacturing costs. Springdale
South successfully began production of its latest generation "two‐up", multiple‐profile composite extrusion machinery.
The new extrusion line, now fully operational, is significantly larger than AERT's other lines and is designed to run two
products simultaneously in lengths of up to 20 feet at a combined rate of up to 10,000 pounds per hour. The
interchangeable extrusion die head design allows manufacturing of multiple products on the same line, without
sacrificing throughput or line speed. This new line features innovative downstream process automation as well.
In 2007, patents were filed and a program was initiated with Allstate Investments to build a large, commercial scale
plastic recycling, blending, and reformulation facility near Watts, Oklahoma.
In February 2010, the Watts Recycling Facility was completed. This state‐of‐the‐art facility:

Demonstrates a full scale, commercial plant featuring AERT’s innovative technologies and methods for recycling
previously unrecoverable plastic film sources from the largest segment of the plastic waste stream,
polyethylene.

Utilizes a series of technologies to separate, clean, agglomerate, identify, blend, and reformulate a contaminated
and highly varying polyethylene waste stream into a high quality, plastic resin or compounds suitable for use as
a lower cost and less energy intensive virgin resin substitute in a wide variety of manufacturing applications.

Was the first recycling and manufacturing facility in Oklahoma to be awarded SILVER LEED certification and is a
National example of U.S. Green manufacturing.


Includes building and infrastructure for 3 lines.
Designed to significantly reduce labor cost per pound of recycled material.

Utilizes proven equipment and AERT recycling technologies.
Products

Was awarded $3.2 million in stimulus funding from the Oklahoma Department of Commerce to complete the
facility to recycle a wider range of plastics

Will shortly diversify customer base, by allowing for sales of recycled plastics and compounds to third parties.
In December 2009, AERT notified the NASDAQ Stock Market of its intent to voluntarily delist its shares and transfer
trading of its Class A Common Stock from the NASDAQ Capital Markets to the OTC Bulletin Board. The company is
awaiting SEC approval to transfer back to the NSADAQ BX marked, once approved.
In May of 2010 AERT entered into a multi‐year, exclusive agreement with BlueLinx Corporation for the distribution of
AERT manufactured ChoiceDek® decking and accessories to Lowe's home improvement warehouses throughout the
U.S. BlueLinx provides delivery to a network that encompasses nearly 1,700 Lowe's retail outlets through its stateof‐the‐art, nation‐wide distribution system. ChoiceDek has been sold exclusively through Lowe's stores since 2002 and
in 2005 AERT was named Lowe's Lumber Supplier of the Year.
Products
AERT makes its products using approximately equal amounts of waste wood fiber, which have been cleaned, sized and
reprocessed, and recycled polyethylene plastics which have been cleaned, processed, and reformulated utilizing their
7
8
patented and proprietary technologies. AERT manufactures a growing line of low-maintenance composite building
products from recycled polyethylene plastic and waste wood fiber which are used as a non-wood alternative building
material for the homebuilding market including decking, door and window components, and exterior trim. The
Company’s primary products, sold under the ChoiceDek® and MoistureShield® brand names, are examples of the
wood/plastic composites manufactured using their proprietary patented technology. Its products have been extensively
tested, and are sold by leading national companies such as BlueLinx Corporation, Lowe’s Companies, Inc. (Lowe’s) and
Therma-Tru Corporation.
ChoiceDek®
ChoiceDek® composite decking materials are easy to work with and provide a firm non-slip surface. These products
come in a range of components that can create a distinctive deck to complement homes, and AERT incorporates a
patented process that utilizes recycled wood fiber encapsulated in recycled polyethylene. This means the deck will
withstand the most demanding exposure to the elements, and does not require sealing or staining.
Key Characteristics:

ChoiceDek is a high quality wood/plastic composite manufactured by AERT (Advanced Environmental Recycled
Technologies)

ChoiceDek will not rot, swell, check, or splinter like traditional wood and does not require toxic preservative
treatments.

Approximately 50/50 wood/plastic composite designed for high weather impact applications

90% Plus recycled content.

Wood fiber is oak and comes from sources such as scrapes left over from furniture, flooring and cabinet
manufacturing

Plastic is a mixture of high & low density polyethylene and comes from sources such as shrink wrap, plastic bags,
milk jugs, plastic film, etc.

AERT’s unique and proprietary manufacturing technology creates the industry’s only fully encapsulated lifetime
composite

ChoiceDek is backed by AERT’s Transferable Limited Lifetime Warranty. The longest and strongest warranty
among composite decking products
Find out more at the ChoiceDek® Website: http://www.choicedek.com/
MoistureShield®
The MoistureShield® brand line of decking products is currently sold to select primary distributors, who re‐sell it to
lumber dealers and contractor yards for sale to local deck builders and home builders. Most of AERT’s MoistureShield®
customers are regularly purchasing, or have exposure to, competing brands of composite decking. On this higher end
MoistureShield®
segment, the Company believes success will require converting customers from competing products to their brands. The
MoistureShield® decking line allows them to diversify their customer base. AERT has recently expanded the
MoistureShield® products into nationwide distribution.
AERT sells MoistureShield® industrial products to door manufacturers for use as component parts in products. For
example, they manufacture door rails built into doors by Therma‐Tru Corporation. In marketing these products, AERT
emphasizes the “value added” feature of the MoistureShield® composite product, which, unlike competing wood
products, can be engineered to incorporate certain desired end‐product characteristics that save customers time and
expense. Customers also avoid the need for chemical treatments to their final product, which are often otherwise
necessary to prevent rot and sustain durability. The durability of MoistureShield® composite components allows
customers to extend the lifetime or warranties of their products compared to alternative competitors.
The Company cannot predict the future size of the markets for MoistureShield® industrial products; however, they
believe that the national door and window and commercial and residential trim markets are large and will allow them to
diversify their customer base over time as they add production capacity and focus on additional opportunities.
AERT has marketed an exterior trim and fascia system under the trade names MoistureShield® Trim and
MoistureShield® CornerLoc. Several national homebuilders have been specifying and using the product. The Company
believes this product line has significant growth potential as a green alternative to plastic (i.e., PVC) and wood trims to
be distributed and sold in conjunction with their MoistureShield® distributors.
Find out more at the MoistureShield® Website: http://www.moistureshield.com/
Green Age Reclamation and Reformulation Technologies
As the wood/plastic composite industry grows, AERT sometimes competes for raw materials with other plastic recyclers
or plastic resin producers. The Company believes that their ability to use more contaminated polyethylene limits the
number of competitors. Nonetheless, they expect to continue to encounter new entrants into the plastics reclamation
business. AERT increased their capacity for processing waste plastic in recent years, which reduced their dependence on
outside suppliers and gave them more control over their costs, but costs are still not to their desired levels until the
remaining phases of the new Watts facility are completed and operational.
AERT has recently developed and applied for U.S. patent protection on several new technologies which identify and
reformulate low end streams of mixed polyethylene plastic waste back into value added green compounds. Six U.S.
patents are currently pending. This allows for polyethylene packaging waste to be converted, cleaned, blended and
reformulated into usable forms of recycled plastics. The new Watts, OK facility recently came on line as a full scale
commercial prototype in order to clean and reformulate these once throw away materials into useful compounds. AERT
currently has several large customers interested in these finished green plastic materials.
AERT has also diversified their product offerings to include:

Deck Tiles

Exterior Trim Product

New Profile and Colors

Next Generation Board
9
10

Next Generation Handrail

Plastic Sales

Tables & Benches from WPC (wood/plastic composite)

Miscellaneous Injected Molded Products

WPC Pellets

Nano Technology Products
AERT Facilities
Springdale, AR (North)
• Primary Extrusion Facility
• 103,000 sq. ft.
• 10 acres with rail
• Four extrusion lines
Springdale, AR (South)
• 60,000 sq. ft. Extrusion Facility
• 18.5 acres
• One line operational, Capacity for three more lines
Junction, TX
• Organic cedar fiber wood processing facility available to ship raw materials to AERT
• Currently For Sale
Watts, OK
• 74,000 sq. ft.
• 12 acres
• Plastic recycling and blending
• Facility has LEED Silver certification
Competition
Lowell, AR
• 520,000 total sq. ft.
• Plastic recycling, blending, and storage
• Substantial investment to mitigate volatile and unstable petrochemical processes
• Includes railroad spur for deliveries, truck scale, and receiving station
Competition
AERT products compete with high-grade western pine, cedar and other premium woods, aluminum, high-performance
plastics, and an increasing number of composites and other construction materials. The Company believes that their
products have superior characteristics, which make them a better value for the consumer; however, they are more
expensive initially than traditional wood products. Manufacturers of some competing products, however, have longestablished ties to the building and construction industry and have well-accepted products. Some of AERT’s competitors
are larger and have research and development budgets, marketing staffs, and financial and other resources that surpass
their resources.
Sales of non-wood decking products to date represent a small portion of the decking market. Pressure treated pine,
cedar, redwood and other traditional woods constitute the vast majority of annual decking sales. AERT thus views wood
decking as their principal competitor. The wood decking industry is highly segmented with many small to medium sized
manufacturers. Wood decking is principally a commodity that competes as the low-priced product, whereas the more
expensive non-wood products must compete on features and performance.
Among manufacturers of alternative decking materials, the Company views Trex Company, TimberTech Ltd., Tamko
Building Products and Fiber Composites LLC as their primary competitors. The market for door products is highly
segmented, with many competitors. They believe that their MoistureShield® industrial products have superior
characteristics and are competitively priced. AERT emphasizes durability, which means that manufacturers and
homebuilders using their products should see reduced warranty callbacks and higher customer satisfaction. The
Company’s product competes not only on durability, but also the ability of the customer to order a product that is
custom manufactured to its specifications.
11
12
AERT Competitive Advantages
AERT Accomplishments and Contributions to the Reduction of Waste By Recycling:
Saves Energy
 Using AERT decking to build a 12 Ft. x 12 Ft. deck saves the energy equivalent of 110 gallons of gasoline due to its
recycled polyethylene and wood content.
AERT Reduces Greenhouse Gas
 A 12 Ft. x12 Ft. AERT deck reduces greenhouse gas by 619 lbs. of CO2 equivalent over a deck constructed with
virgin materials.

The wood and plastic recycling that AERT does each year has the equivalent impact of taking 54,162 passenger
vehicles off the road.
AERT Reduces Waste
 AERT recycles millions of plastic grocery bags and milk jugs together with other plastic waste material each year.
Each 12 foot AERT deck board contains the equivalent of 889 recycled plastic grocery bags or 92 recycled milk jugs.
Creates Jobs
 About 65 jobs are created for each 10,000 tons of material recycled per year.
Lowers Cost
AERT Statistics:

In most cases, the use of recycled materials lowers manufacturing cost for similar products regardless of the
industry (paper, steel, glass, plastic, aluminum, etc.)
AERT Statistics:

Wood Recycled - 87,450,000 Pounds Per Year

Plastic Recycled - 71,550,000 Pounds Per Year

Total Landfill Reduction- 159,000,000 Pounds Per Year

Landfill Savings Equivalent - 21 Football Fields Stacked 10 Ft. High

Greenhouse Gas Savings - 165,360 MTCO2E Per Year

Energy Saved by Recycling - 3.13 Trillion Btu Per Year

Gasoline Equivalents Saved by Recycling – 596,159 Barrels Per Year
Total U.S. polyethylene sales for 2009 was 36.6 billion pounds, up 0.9 billion pounds from 2008. Year to date sales of
polyethylene for 2010 are up 2.3 percent over sales for 2009. U.S. exports grew sharply in 2009 finishing the year up
21.8 percent. In 2010 sales have continued stronger than expected due to slower than expected completion of
polyethylene production facilities in the middle‐east. Overall global polyethylene production capacity is currently near
100 billion pounds with growth projected to be strongest in the Middle East, China, and India. Recycled polyethylene
resin sales for the U.S, stands at 1.5 billion pounds and is projected to increase at a rate of about 14% per year through
2014.
Investment Opportunity
Advanced Environmental Recycling Technologies, Inc. is seeking to raise $10M USD to use for expansion and working
capital.
Use of Proceeds

$1M USD nano product technology/commercialization

$1M UDS expansion - Watts equipment

$7.3M USD working capital

$0.7M USD commission
13
14
Financials
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
2009
2010
Cash flows from operating activities:
Net income (loss) applicable to common stock
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization
Dividends on preferred stock
Gain from fixed asset disposition
Decrease in other assets
Changes in current assets and current liabilities
Net cash provided by operating activities
$
(287 ) $
875
2,999
409
(54 )
585
(2,722 )
930
3,079
396
(6 )
280
(110 )
4,514
Cash flows from investing activities:
Purchases of land, buildings and equipment
Proceeds from disposition of equipment
Net cash used in investing activities
(6,412 )
54
(6,358 )
(2,174 )
6
(2,168 )
Cash flows from financing activities:
Net payments on line of credit
Payments on notes
Payments on capital lease obligations
Decrease in cash restricted for payment of debt and construction costs
Net cash provided by (used in) financing activities
(1,250 )
(559 )
(106 )
6,825
4,910
(1,226 )
(122 )
(1,348 )
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
(518 )
1,238
720 $
998
243
1,241
Financials
BALANCE SHEETS
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Trade accounts receivable, net of allowance of $7 at December 31, 2009
and $616 at December 31, 2008
Inventories
Prepaid expenses
Total current assets
December
31,
2009
December
31,
2008
$
$
Land, buildings and equipment:
Land
Buildings and leasehold improvements
Machinery and equipment
Transportation equipment
Office equipment
Construction in progress
Total land, buildings and equipment
Less accumulated depreciation
Net land, buildings and equipment
Other assets:
Debt issuance costs, net of accumulated amortization of $1,538 at December 31, 2009
and $1,328 at December 31, 2008
Debt service reserve fund
Other assets, net of accumulated amortization of $478 at December 31, 2009
and $450 at December 31, 2008
Total other assets
Total assets
$
243
-
1,238
7,631
5,163
6,795
707
12,908
1,574
10,551
933
21,927
1,989
8,903
45,296
830
2,396
16,006
75,420
36,240
39,180
1,989
9,213
46,680
1,125
2,801
5,810
67,618
33,004
34,614
2,941
222
3,151
2,101
1,087
4,250
56,338
371
5,623
62,164
$
15
16
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Net sales
Cost of goods sold
Estimated liability for claims from class action settlement
Gross margin
Year Ended December 31,
2009
2008
$
71,073 $
87,398
55,223
78,317
5,100
2,870
10,750
6,211
Selling and administrative costs
(Gain) loss from asset impairment and disposition
Operating loss
11,924
(92 )
(1,082 )
20,530
5,516
(19,835 )
Other expenses:
Estimated liability from expected class action settlement
Late registration fees
Net interest expense
Loss before dividends and income tax
Dividends on preferred stock
Loss before income tax
Income tax provision
Net loss applicable to common stock
$
273
(3,396 )
(4,205 )
(805 )
(5,010 )
(5,010 )
$
(1,963 )
(682 )
(3,781 )
(26,261 )
(826 )
(27,087 )
8,831
(35,918 )
Loss per share of common stock (basic and diluted)
$
(0.10 )
$
(0.75 )
Weighted average common shares outstanding (basic and diluted)
49,309,251
47,937,520
Management Team
Management Team
The directors and executive officers of the Company as of April 23, 2010 are as follows:
Name Age Position
Joe G. Brooks 54 Chairman of the board of directors and chief executive officer
Timothy D. Morrison
President and director
J. R. Brian Hanna
Chief financial officer
Stephen W. Brooks
Chief operating officer, secretary and director
Jim Precht
Senior vice-president — sales and marketing
J. Douglas Brooks
Senior vice-president — international sales and product development
Alford Drinkwater
Senior vice president — development and governmental affairs
Lee Martin Reynolds
Senior vice president — administration
Timothy P. Leduc
Senior vice president — operations
Jerry B. Burkett
Director
Edward P. Carda
Director
Vernon J. Richardson
Director
The Company’s board of directors elected Joe G. Brooks as its chairman and the Company’s co-chief executive officer in
December 1998. In addition, he served as president from February 2000 until March 2008. In July 2005, Mr. Brooks
became sole chief executive officer. Mr. Brooks has served as president or in other executive office capacities and has
been a director since the Company’s inception in December 1988, including service as chairman and CEO from inception
until August 1993. He was a member of Clean Texas 2000, appointed by then Governor George W. Bush in 1995. Mr.
Brooks is a listed inventor on 13 of the Company’s patents with additional patents pending, and is a founder of AERT.
Timothy D. Morrison joined AERT as President in March 2008 and has served as a director since June 2009. Mr.
Morrison came to AERT with a background in polymer engineering as well as experience in turnaround management. He
began his career with Dow Chemical in the hydrocarbons and polyethylene group where he held both operations and
business positions. He led the Promix Joint Venture with Dow, Texaco and Enterprise Products before moving to Harris
Chemical in 1992 as an equity partner where he led the turnaround of operations, customer service, IT, purchasing, and
logistics for the leveraged buyout group. In 2000, Mr. Morrison joined Cyctec’s engineered products composite business,
managing the composites and adhesives business. He brings experience in successfully servicing the needs and
requirements of big box retailers from Valspar, where he served most recently as manager for Valspar’s Texas Division.
Mr. Morrison comes to AERT with a BS in Chemical Engineering from the University of Alabama, an MBA from the
University of Southern California, and training in both Lean Manufacturing and Six Sigma.
J. R. Brian Hanna joined AERT as Chief Financial Officer in November 2008. Mr. Hanna has most recently served as
Chief Financial Officer of JT Sports (formerly Brass Eagle Inc.) from December 1, 1997 to October 31, 2008. Mr. Hanna
obtained his Chartered Accountant’s designation with Deloitte & Touche in 1982 and later became a Certified Public
Accountant. Mr. Hanna’s background includes merger and acquisition integrations, financial system/IT implementations
in addition to establishing internal controls, strategic planning and treasury functions.
The Company’s board of directors elected Stephen W. Brooks as co-chief executive officer in December 1998 in which
position he served until July 2005 when he became vice chairman and chief operating officer. Mr. Brooks was appointed
secretary in January 2009. He has been a director since January 1996. Mr. Brooks has served as CEO and chairman of the
board of Razorback Farms, Inc. from January 1996 to the present. Razorback Farms is a Springdale, Arkansas based firm
that specializes in vegetables processing. Mr. Brooks also serves on the board of the Ozark Food Processors Association.
17
18
Jim Precht served as executive vice-president of sales and marketing for the Company since February 2001, and as
senior vice president since September 2003. Mr. Precht was formerly general manager of Weyerhaeuser Building
Materials’ Pittsburgh Customer Service Center with 32-years of industry experience.
J. Douglas Brooks served as executive vice-president from inception to September 2003 and has been a senior vice
president since September 2003, currently serving as senior vice president of international sales and product
development. Mr. Brooks was vice15 president of plastics from 1995 through 1998, has been in charge of raw material
sourcing and strategic relationships, was previously project manager for AERT’s polyethylene recycling program with
The Dow Chemical Company, and is a joint inventor on several of AERT’s process patents for recycling polyethylene film
for composites.
Alford Drinkwater has served as senior vice president in various capacities since September 2003, and is currently the
Company’s senior vice president of development and governmental affairs. Prior to joining the Company in May 2000,
Mr. Drinkwater had been the Assistant Director for the Established Industries Division of the Arkansas Department of
Economic Development and was on the Advocacy Team from November 1988 until January 2000. From September 1986
until July 1988, he owned and operated Town and Country Waste Services, Inc. a waste services company engaging in
the development of waste recycling, energy recovery, and disposal systems. From April 1981 until January 1987, Mr.
Drinkwater was the Resource Recovery Manager for Metropolitan Trust
Company, and was primarily involved in waste-to-energy systems development. From July 1974 until April 1981, Mr.
Drinkwater worked for the State of Arkansas as Assistant to the Chief of the Solid Waste Control Division of the Arkansas
Department of Pollution Control & Ecology and as the Manager of the Biomass and Resource Recovery Program of the
Arkansas Department of Energy.
Jerry B. Burkett has served on the board of directors of the Company since May 1993. Mr. Burkett has been a rice and
grain farmer since 1979 and has been a principal in other closely held businesses. He is the past president of the
Arkansas County Farm Bureau. In April 2002, Mr. Burkett was elected to serve as a director of the Ag Heritage Farm
Credit Services board.
Edward P. Carda was elected to the board of directors in July 2005. Mr. Carda began his 37-year business career with
Weyerhaeuser Company in June 1967, ending with his retirement in December 2003. While at Weyerhaeuser, he served
in various management positions, including statutory reporting, heading large accounting departments, interacting with
external and internal auditors and many areas of management. Mr. Carda spent the last 10 years of his career as the
business controller for the distribution business of Weyerhaeuser. While in this capacity, he received many awards for
his performance for profit and working capital improvement initiatives. Mr. Carda attended the University of Montana
and graduated with a degree in accounting. He has served for 25 years on the board of directors of the Woodstone Credit
Union in Federal Way, Washington and is currently its Vice Chairman. He also serves on the credit union’s audit
committee.
Dr. Vernon J. Richardson was elected to the board of directors in July 2010. Dr. Richardson has been the accounting
department chair in the Sam M. Walton College of Business at the University of Arkansas since 2007. He received an
MBA and undergraduate and masters degrees in accounting from Brigham Young University prior to receiving a Ph.D. in
accounting from the University of Illinois at Urbana-Champaign. Dr. Richardson then joined the faculty of the University
of Kansas, holding assistant and associate professor positions from 1997 to 2005. He has been a professor in the Sam M.
Walton College of Business at the University of Arkansas since 2005 and is currently the S. Robson Walton Endowed
Chair in Accounting. Dr. Richardson has served in various positions with the American Accounting Association, and
performs expert witness and consulting services. He has served as a director at Reassure America Life Insurance
Company. Director qualifications include leadership, research, technology and finance experience as an accounting
professor and chair of a university level accounting department.
About Wakabayashi Fund LLC
About Wakabayashi Fund LLC
Wakabayashi Fund LLC., a private equity and consulting firm with offices in Tokyo, Japan and New York, NY, provides
corporate capitalization and institutional investor relations consulting services. Wakabayashi Fund may invest on a
principal basis and acts in an agency capacity to procure capital for both profitable and emerging small‐cap companies,
identifying institutional funding sources for its clients and further develops the investor relations activities. Corporate
development, short term and long term financing, institutionally driven sponsorship, and management consulting
services are our areas of expertise. For further information on the company please visit www.wakabayashifund.com.
Disclaimer
Any data, estimates and opinions expressed herein has been obtained from sources that we believe to be reliable and
reflect our judgment. We do not guarantee its accuracy and such information may be incomplete or condensed and
subject to change without notice. Neither the information nor any opinion expressed shall be construed as, or constitute
to be, an offer to buy or sell securities, or any options futures or other derivatives related to such securities ("related
investments"). This is not an investment recommendation. We are biased and not independent in this report. This
material is not intended for public consumption, distribution or reproduction. Advanced Environmental Recycling
Technologies, Inc. has accumulated substantial deficits since inception, has a negative net worth (Stockholder’s Equity),
reliance on loans from Officers, Directors to pay expenses, default on loans, nominal cash position and an Auditor’s going
concern opinion.
Wakabayashi Fund LLC and its affiliate do own shares of Advanced Environmental Recycling Technologies, Inc. and has
been compensated 500,000 shares of common stock and will sell. Although Wakabayashi Fund, LLC does not believe
that its activities come within the purview of Section 17 (b) of the Securities Act of 1933, in an abundance of caution and
in the intention of full disclosure, we call the reader’s attention to the fact that Wakabayashi Fund, LLC may receive
investment banking consulting fees. Wakabayashi Fund, LLC. Its officers, directors, affiliates or employees may have a
long / short position in any securities of the issues. Wakabayashi Fund, LLC or its affiliates may from time to time
perform services for or solicit investment banking, consulting services or other business for Advanced Environmental
Recycling Technologies, Inc.. This report has been authorized and approved by Mr. Joseph Brooks , CEO of Advanced
Environmental Recycling Technologies, Inc. (11/5/2010)
NOTICE OF CONFIDENTIALITY
The information contained herein is intended only for the confidential use of the recipient. This document is not to be
reported or copied or made available to others. If the reader of this message is not the intended recipient, or person
responsible for delivering it to the intended recipient, you are hereby notified that you have received this
communication in error, and that any review, dissemination, distribution, or copying of this communication is strictly
prohibited. If you receive this in error, please notify the sender immediately by telephone at 914.613.3002 or
[email protected] and destroy this e-mail message. To be removed from this distribution or further
information, contact Wakabayashi Fund LLC at [email protected] or fax to 646 514 1601.
For Further details / clarifications please contact:
Tokyo Office:
4-13-20 Mita Minato-ku
Tokyo Japan 108-0073. +81 03 6657 8339
New York Office:
110 Wall Street, 11th FL
New York New York 10005 +01 914 613 3002
Website: www.wakabayashifund.com
19

Advanced Environmental Recycling Technologies, Inc

Transcription

Similar documents

NEWS FOR YOU - Prince George`s County Public Schools

Master Recycler Program Self Haul Disposal Rates

McCaffrey`s Princeton - Association of New Jersey Recyclers

City of Tampa Event Recycling

ABOP - MarBorg Industries

AUGUST - Village of Beiseker