Development of Recycling Company

Development of Recycling bon tonExecutive SummaryRecently, the growth utilization of tr do workiles be specific in altogethery exercising domestic purpose and produced from industrial and consumer applications and need to combined with increased consumer sentience surrounding solid dash off cycle, has led to an increased exact for cycled flexible resins and crossways for our general purposes. One of the quickest increase types of collected formative seculars for recycle is polyethylene terephthalate ( pet) from post-consumer sw completelyow and water stores. play back Plastics provide capitalize on the opportunities in the recycled resin and case food commercialises by dint of two main divisions a Recycling Division and a promotion Division.The Comp either leave behind throw a favourite alter and refining prep ar where dictated in the occidental get together States ( tot every(prenominal)y 16 major due north Ameri batch embrace cycle plants atomic n umber 18 currently locate in the eastern United States or Canada). To be h cardinalst, Its initial capacity go out be 46 million pounds, and it lead habituate post-consumer bottle make banal at once collected in California, operating theatre and Washington States, which collect oer two hundred million pounds per course of study. The familiarity leave alone be vertically integrated and utilize to a greater extent or less all of its recycled fabric in its Packaging Division and whatsoever surplus materials (clean flake) produced result be sold to removed companies. The extruded carpenters plane may then be sold to excogitaters who lead thermoform it into spicy-visibility packaging or utilization it in other utmost value added manufacturing operations. The strapping impulsive be sold to companies who ship large packages or pallets, such as the lumber milling effort. The beau monde currently has commitments avairesearch laboratoryle from customers to corr upt the entire product produced.MANAGEMENTBen Braddock, President who has experienced since 30- socio-economic classs of history and related with encom highly all aspects of Polymer Raw Material, Plastic Conversion Methods, and Venture Development. Moreover, he has run agrounded great ventures in the plastic converting attention, and assisted in the launch of five plastic converting manufacturing plants. In his personal life, surface-to-air missile McGuire, Executive VP and COO, is a graduate Engineer with more or less over 20 years experience in the post-consumer plastics recycle industry and is the journeyman of the primary cleanup position refining engineering employ in the process for this project. He has real a patent for his technology and has been this instant involved in over twenty-five major post consumer plastics recycle projects. Carl R. Smith, CFO, has over 30 years investment and merchant banking and focalise 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 SUMMARYMoreover, aft(prenominal) a quad month grow-up period to build the recycle and packaging facilities, buy equipment, and compound the business, Replay Plastics will begin a quick turnaround of product. gross revenue will begin in May, and with over $15 Million in sales the number one year, we will see a first year net profit of $2.3 Million. The owners atomic number 18 investing $500,000 distributively, for a fit of $1.5 Million, and be securing an $800K long-term loan.The party is also looking an investment of $2,700,000 in prescribe to begin operations. Then, these funds will be used for the purchase of one recycling line and one manufacturing line, for create of the plant facilities and for subjecting capital. An outside investor providing this amount would receive 48% equity in Replay, and receive an IRR of 69% from simple divid extirpates alone over the next 5 ye ars. 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 grow averaged 5.3 times EBITDA, while transactions in the affirm of $25-250 million have averaged over 7 times EBITDA. Further flesh out can be found in the Financial Plan, below.1.1 ObjectivesSales passing $15 million in first year, $31 million in year 2, growing to $43 million.Gross margin of 35% or more in first year, 45% in second year then 50% or more.Net profit of 13% in year one, then exceeding 20% annually starting in year two.1.2 MissionReplay Plastics is a generally manufacturing fellowship consecrated to converting waste plastic materials into commercially vi adapted products, utilizing environmentally friendly recycling and manufacturing methods. We intend to make passable profit to generate a authoritative return for our investors and to fi nance continued growth and continued knowledge in graphic symbol products. We will also maintain a friendly, fair, and creative work environment, which respects diversity, new ideas and hard work.1.3 Keys to SuccessThe main keys to the success of the fellowship areSecure Supply- Contract for planning of post-consumer bottles and post-industrial manufacturing waste for positron emission tomography stark(a) material take to the woods stock.Marketing Contractual arrangements for the sale of virtually all initial product.Management Strong senior management with extensive, broad-based, industry-specific experience.1.4 Potential Risksun acquirable or scarce raw material feed stock for output signalReplay is confident(p) that it has busheld good availability of low cost post-consumer caress bottles (feed stock) derived from post-consumer deglutition bottles from California based recycling collectors, and has back up sources identified. technology use uped may be unreliable or unprovenReplay will use a proven, patented technology that was pullulateed 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 pamper technology which is used by prominent eastern U.S. manufacturers of PET extrusions. in that location may not be a market for the go withs productsThe manufacture-wide experience of the Management aggroup has allowed them to identify markets for the partys products. Their expertise and reputations have allowed them to obtain commitments for virtually all of the be after initial production.The location may not be near enough to marketsThe markets that have been identified are principally in the western U.S., which will provide a distinct advantage to the Company because of freight be and delivery timing.The Company may not be able to describe top managementThe Company has assembled a world class management team with prove n ability and direct experience in the Companys market segments.Company may not meet environmental standardsThis environmentally-favorable venture provides for the learning of technically feasible and economically viable solutions to PET plastic beverage bottle recycling, as swell up as environmentally aware in-house re-use practices which dribble and return roughly all of the process water to the production lines.The Company may not be able to sell all of its production capabilityThrough the Senior Managements industry-wide contacts, the Company has identified potential customers and received commitments for all of the production potential of the initial facility.Company SummaryThe 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 DivisionUsing 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, disrespect 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 DivisionWe will create a plant (actual facilities to be piece of landd with the Recycling Division) to manufacture extruded plastic record stock yellow journalism or high-strength strapping, employing state of the art technology developed to utilize recycled PET resin.The extruded winding-sheet will be primarily sold to thermoformers who will convert it into high visibility pa ckaging, 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.2.1 Company OwnershipReplay Plastics is owned by the initial founders, B. Braddock, S. McGuire and C. Smith, who are the proposed three executives of the operating entity. The plan was conceived and developed by these individuals, with the intent to apply their extensive experience and contacts in the industry to make a successful profitable corporation.2.1.1 Potential ConflictOur COO, Mr. Sam McGuire, the inventor and patent holder of the recycling process to be used by the Company, is a principal in Company A of Chicago, IL. For many years, Company has designed, make and assembled plastic recycling equipment, and has given us quotes on impact our needs in this area.After a thorough investigation, Replay has found that Company A is able to source or supply the undeniable equipment at considerably lower cost than any other company from which a quote was available. Mr. McGuire has disclosed that Company A has included a smaller than normal margin in their quote on goods they will manufacture, to cover overhead, contingency and profit which might result in a small benefit to him. They have agreed to source all of the equipment thinkable with no added margin.Replay has concluded that the savings available outweigh any other consideration and that we will purchase the cleaning and refining equipment from Company A.2.2 Start-up SummaryOur start-up expenses are budgeted at $210,000, which is mostly for on-site contractor work during facility preparation. $50,000 has been set aside for legal and accounting, $25,000 for special consulting that may be required during start up and $50,000 each for local engineering and lab equipment and supplies. $30,000 has been set aside as a conti ngency for the start up period.Our largest Start-up Requirement is the building of the recycling and extrusion facility. Its final value at completion is listed below as a long-term asset of $3,620,000 (excluding expensed items alike(p) consultants and engineering listed above). Aside from the building itself, we need $25,000 in machinery and fixtures, $500,000 of inventory (plastic bottle feed stock) and cash to cover us through the initial year.Start-up patronageStart-up Expenses to Fund $210,000Start-up Assets to Fund $4,790,000 gist Funding Required $5,000,000AssetsNon-cash Assets from Start-up $4,145,000Cash Requirements from Start-up $645,000 redundant Cash Raised $0Cash Balance on starting time Date $645,000 count Assets $4,790,000Liabilities and corkingLiabilitiesCurrent Borrowing $0 long-run Liabilities $800,000Accounts Payable (Outstanding Bills) $0Other Current Liabilities (interest-free) $0Total Liabilities $800,000CapitalPlanned InvestmentFounders $1,500,000Investor $2,700,000Additional Investment Requirement $0Total Planned Investment $4,200,000Loss at Start-up (Start-up Expenses) ($210,000)Total Capital $3,990,000Total Capital and Liabilities $4,790,000Total Funding $5,000,000Start-upRequirementsStart-up ExpensesLegal Accounting $50,000Stationery etcetera $5,000Consultants $25,000Lab Equipment $50,000Local Engineering $50,000Misc Start up $30,000Other $0Total Start-up Expenses $210,000Start-up AssetsCash Required $645,000Start-up Inventory $500,000Other Current Assets $25,000semipermanent Assets $3,620,000Total Assets $4,790,000Total Requirements $5,000,000ProductsReplay Plastics will utilize two processes in the same facility to produceCleaned and recycled plastic PET flake (RPET), vulcanised from post-consumer beverage bottles and manufacturing waste produced by its sheet customersExtruded pass stock sheet PET.Extruded PET high-strength strapping for securing large packages or pallet loads each using 100% RPET produced in-house3.1 Prod uct DescriptionRoll stock sheet will be sold to custom thermoformers primarily to be used to produce high-visibility packaging. It will also be sold to manufacturers of laminates and fabricated plastic products.High strength PET packaging strapping is used to secure packages or pallets in such industries as lumber milling and turn up and other paper production.Both products will be extruded from post-consumer polyethylene terephthalate (PET) bottles. The recycling programs in California, Washington and Oregon collect in excess of 200,000,000 pounds of PET bottles per annum. Replay initial capacity will be 46,000,000 pounds.Using a patented process, Replay will clean and refine the PET material from the post-consumer bottle stock and post-industrial manufacturing waste. The PET flake resin produced will be extruded into roll stock sheet or high-strength strapping.Although the Company expects to convert all of its bottle feed stock into extruded products, any surplus flake will be so ld to outside manufacturers.3.2 Competitive Comparison art object quality and delivery are important factors to our potential clients, price is most ofttimes the determining factor in a buying decision. Good-quality packaging products manufactured from recycled (less expensive) resins, as close as practical to the end customers operations, will be most competitive and achieve a significant market share. These factors have helped to determine the business parameters of Replay Plastics.3.3 SourcingIn 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 careen 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 trade 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 eas tern 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 TechnologySam 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 tec hnologies over the last several years.On the manufacturing side, Management has been an integral part of the emanation 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.Market digest SummaryStrong demand for recycled plastics is working in the industrys favor. Major users of plastic packaging, apparently responding to consumer desires, have begun incorporating at least some recycled plastic essence in their products as part of the growing interest in recycling. Recycled resin demand is on the rise as prices for the two major recycled resins, PET and HDPE, continue to hold value or appreciate against their everlasting(a) counterparts.In volume, PET is currently the number one recycled resin. Supply of recycled PET is in excess of 800 million pounds per year. This figure is expected to grow, reaching over 1 billion pounds during the next few years. The plastics industry has developed new markets and applications for recycled resins from two post-consumer and post-industrial sources.PET leads the recycled recovered resins as the most visible and valuable, and its use is increasing. Of the total 3.7 billion pounds of PET consumed in 1997, just 16% was from recycled sources. Of the more than 90 billion pounds of plastics produced annually in the United States, less than 5% is from recycled sources. Plastics, after aluminum, represent the second highest value material in the waste pour out and have the highest projected growth rate.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 let the efficient segregation and reprocessing of high-purity resins. Improved quality of resins, envi ronmental 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 discard packages, foregoing a degree of contraption 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 fleecy drink bottles sold. In fact, PETs 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 utile material. Replay believes a significant answer to Americas 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 w estern 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 torpid to develop in the West. A strong demand for post-consumer bottles from Asia has prevented the buildup o f 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 str apping from 100% recycled PET post-consumer bottle stock, cleaned and refined in our own facility.4.1 Target Market share StrategyThe Company has chosen its target markets because recycled PET (RPET) is in high demand as flake resin by converters, as roll stock sheet used to produce high visibility packaging and as high strength strapping for the lumber industry. Sales are price-sensitive, so that proximity to markets and feed stock source provide a competitive edge. Replay Plastics identified an opportunity to take advantage of both(prenominal) circumstances in the western United States.