Development of Recycling Company

Development of Recycling CompanyExecutive SummaryRecently, the growing utilization of plastics atomic account 18 specifically used domestic purpose and produced from industrial and consumer applications and emergency to combined with increased consumer alertness surrounding solid mishandle cycle, has led to an increased demand for recycled plastic resins and products for our general purposes. One of the prontoest change magnitude types of undisturbed plastic textiles for recycling is polyethylene terephthalate (PET) from post-consumer beverage and water nursing bottlefuls. Replay Plastics exit capitalize on the opportunities in the recycled resin and packaging markets through two principal(prenominal) divisions a Recycling segment and a Packaging Division.The Company testament create a PET cleaning and refining plant where located in the western unify States (all 16 major North American PET recycling plants are currently located in the easterly unite States or Canad a). To be h iodinst, Its initial subject impart be 46 million pounds, and it lead lend oneself post-consumer bottle turn over inventorying presently sedate in California, Oregon and Washington States, which collect over 200 million pounds per year. The Company entrust be vertically integrated and enforce al close to all of its recycled material in its Packaging Division and any nimiety materials (clean microprocessor chip) produced will be sold to outside companies. The extruded tack may then be sold to manuf cropurers who will thermoform it into high-visibility packaging or use it in other high rate added manufacturing operations. The husky 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 the entire product produced.MANAGEMENTBen Braddock, President who has experienced since 30-years of history and related with encompassing all aspects of Poly mer Raw Material, Plastic Conversion Methods, and Venture Development. Moreover, he has set uped great ventures in the plastic converting industry, and assisted in the launch of five plastic converting manufacturing plants. In his personal life, Sam McGuire, Executive VP and COO, is a graduate Engineer with almost over 20 years experience in the post-consumer plastics recycling industry and is the artificer 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 genteelness over $500 million and served as board member and/or officer in over 40 public and private companies.FINANCIAL summaryMoreover, after a four month grow-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 graduation year, we will see a premier 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 looking an investment of $2,700,000 in found 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 working capital. An outside investor providing this occur 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 sell a public offering of shop or a buy-out by a related business. Recent information on private sales of sympathetic industry companies has indicated that transactions under $25 million have averaged 5.3 times EBITDA, while t ransactions in the range of $25-250 million have averaged over 7 times EBITDA. Further details can be found in the Financial Plan, be funky.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 sulphur 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 company dedicated to converting waste plastic materials into commercially viable products, utilizing environmentally friendly recycling and manufacturing methods. We signify to make enough profit to generate a significant return for our investors and to finance continued growth and continued development in quality 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 Company areSecure Supply- shove 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 takings.Management Strong higher-ranking management with extensive, broad-based, industry-specific experience.1.4 Potential RisksUnavailable or scarce raw material feed stock for issueReplay 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.Technology plighted may be unreliable or unprovenReplay will use a proven, patented technology that was highly-developed by one of its principals for the cleaning and recycling phase. The jutting 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.There may non be a market for the Companys productsThe Industry-wide experience of the Management Team has allowed them to identify markets for the Companys products. Their expertise and reputations have allowed them to obtain commitments for virtually all of the planned initial production.The topical anestheticization principle may not be near enough to marketsThe markets that have been identified are earlier in the western U.S., which will provide a clear-cut advantage to the Company because of freight costs and delivery timing.The Company may not be able to attract top managementThe Company has assembled a world class management team with proven ability and direct experience in the Companys market segments.Company may not meet environmental standardsThis 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 ret urn 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, 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 DivisionWe will create a plant (actual facilities to be shared with the Recycling Division) to manufacture extruded plastic roll stock tack or high-strength strapping, employing state-of-the-art technology developed to utilize recycled PET resin.The extruded opinion poll 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.2.1 Company OwnershipReplay Plastics is owned by the initial founders, B. Braddock, S. McGuire and C. S mith, who are the proposed three executives of the in operation(p) entity. The plan was conceived and developed by these individuals, with the intent to apply their extensive experience and contacts in the industry to building a successful profitable corporation.2.1.1 Potential divergenceOur 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 some years, Company has designed, manufactured and assembled plastic recycling equipment, and has given us quotes on meeting our needs in this area.After a thorough investigation, Replay has found that Company A is able to source or supply the required 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, adventure 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 reason that the savings available outweigh any other consideration and that we will purchase the cleaning and refining equipment from Company A.2.2 fasten on-up SummaryOur start-up expenses are budgeted at $210,000, which is for the most part for on-site geldor services 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 contingency 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 like 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 FundingStart-up Expenses to Fund $210,000Start-up Assets to Fund $4,790,000Total Funding Required $5,000,000AssetsNon-cash Assets from Start-up $4,145,000 hard cash Requirements from Start-up $645,000Additional Cash Raised $0Cash Balance on Starting Date $645,000Total Assets $4,790,000Liabilities and CapitalLiabilitiesCurrent Borrowing $0Long-term 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 $4,200,000passing 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 etc. $5,000Consultants $25,000Lab Equipment $50,000Local Engineering $50,000M isc Start up $30,000Other $0Total Start-up Expenses $210,000Start-up AssetsCash Required $645,000Start-up Inventory $500,000Other Current Assets $25,000Long-term 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), recovered from post-consumer beverage bottles and manufacturing waste produced by its sheet customersExtruded roll stock sheet PET.Extruded PET high-strength strapping for securing large packages or pallet loads each using 100% RPET produced in-house3.1 Product 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. gritty strength PET packaging strapping is used to secure packages or pallets in such industries as lumber milling and corrugated and other write up production.Both p roducts 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 sold to outside manufacturers.3.2 Competitive ComparisonWhile quality and delivery are important factors to our potential clients, price is most often 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 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 attitude 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 samely 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 race 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 favour 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 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.Market Analysis SummaryStrong demand for recycled plastics is working in th e industrys favor. Major users of plastic packaging, simply responding to consumer desires, have begun incorporating at least some recycled plastic content 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 virgin 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 both 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 annu ally in the United States, less than 5% is from recycled sources. Plastics, after aluminium, represent the second highest value material in the waste stream 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 permit the competent 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 veritable(a)tide 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, 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 i ts 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 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 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 e astern 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 purblind 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 proprietorship formers. With the development of the recycling industry for P ET 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.4.1 Target Market Segment schemaThe 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. S ales 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 circumstances in the western United States.