Envirokare Tech, Inc. Chairman's Letter to the Shareholders
Monday July 24, 2:19 pm ET
NEW YORK--(BUSINESS WIRE)--July 24, 2006--Envirokare Tech,
Inc. (OTCBB:ENVK - News):
Dear Shareholders and Friends of Envirokare Tech, Inc.,
On behalf of Envirokare Tech, Inc. and its board of directors, we are very pleased, once again, to provide the following report, describing progress being made by its composites industry segment, LRM Industries, LLC ("LRM"). Envirokare, through its joint venture interest with NOVA Chemicals in LRM, is developing state-of-the-art TPF ThermoPlastic Flowforming(TM) technology, producing large molded products from reinforced and un-reinforced thermoplastic polymers.
We continue to be pleased with the ongoing working relationship between ENVK and NOVA Chemicals, wherein NOVA continues to provide strong support for our joint venture, LRM.
Strong progress is being made by LRM on the following fronts:
1. Relocation of operations to Rockledge, Florida
2. Expansion of plant production capacity, including procurement of financing to facilitate plant expansion
3. Market development
4. Financial performance and outlook
5. Improvements in TPF ThermoPlastic Flowforming(TM) processing technology
6. Protection of Intellectual Property associated with our processing technology
7. Safety and the development of operational and administrative business systems
Rockledge Facility:
The relocation of the Mims operations to Rockledge was completed in the second quarter with our development line now being fully operational. During the relocation timeframe, LRM refurbished and reconditioned key components of the product development line, to ensure the quality and reliability of the line's operation. A new 600 ton press with the ability to produce parts with up to 100 square feet in surface area has been added extending the range of parts that can be produced from this system. The company is currently in negotiations with two customers to utilize the new capability of this development line to produce composite prototype parts during the fourth quarter of 2006, for marine and infrastructure applications replacing other conventional materials.
Capacity Expansion and Financing:
As we reported in our March letter, the new Rockledge facility can accommodate two full production lines in addition to the product development line presently in operation. Envirokare recently announced that LRM obtained financing from SunTrust Bank for the construction of a new manufacturing production line that will be installed in the Rockledge facility. The financing package includes more than $2 million in equipment financing and a revolving credit line for working capital, providing LRM with more than $3 million to implement the operations of the new production line. LRM's Board of Directors approved the capacity expansion on April 27th of this year, and LRM was able to secure the financing package with the backing of NOVA, in late June 2006. Progress in market development activities and projected customer orders for toll-production parts is driving the need for the new production line. The key components of the new production line have been procured, including hydraulic presses, extruders and distribution dies, and the facilities work necessary to install the new equipment is underway. The new production line, which will add more than 10 million pounds per year of polymer processing capacity to the Rockledge facility, is expected to be fully operational by the fourth quarter of 2006, and staffing the new production line will create more than 20 new jobs.
Market Development:
As already discussed, LRM marketing efforts have progressed to a commercialization level now requiring a full production line. Should LRM's marketing efforts continue to progress as strongly as we anticipate, the new production line currently being installed will be producing at full capacity by mid-2007, thereby requiring a second production line at the Rockledge facility. Under current sales and marketing projections, the build-out of the Rockledge facility will reach over 25 million pounds of polymer processing capacity during 2007. Initial product sales for the new production line are projected to include components for temporary shelters, including portable toilets and showers, molded parts used in refrigeration applications and materials handling products. The majority of these products are conversions from conventional thermoforming processes to the TPF ThermoPlastic Flowforming(TM) process, driven by LRM's cost advantage and enhanced product features available in the final product when utilizing the TPF ThermoPlastic Flowforming(TM) process.
Based on market surveys and customer response, LRM has developed a new five year business plan that incorporates the addressable opportunities to convert existing products found in the marketplace, currently manufactured from less efficient process technologies, to the TPF ThermoPlastic Flowforming(TM) process.
In addition to these short sales cycle business opportunities previously discussed, LRM continues to pursue commercialization and product development programs for advanced long-fiber reinforced thermoplastic (LFRT) parts. Current product development programs are proceeding with a number of major industrial customers for application in several markets, including: building and construction, marine and materials handling. Potential end-use applications include, decking products, window frames, marine struts and beams and portable containers. These product applications require longer sales and development cycles so that customer orders from these efforts are expected during 2007 and beyond.
Upon commissioning of our first full-scale production line, and demonstrating the economic value in-use to customers, LRM will have a strong base from which to launch its licensing efforts for our TPF ThermoPlastic Flowforming(TM) technology, targeting specific applications in specific geographic areas.
Finally, our efforts in procuring government product development contracts continue, with the submission of new SBIR (Small Business Innovative Research) proposals for 2007 to government agencies, and we are optimistic that LRM will receive new government contract awards during the last two quarters of 2006, based on proposals submitted earlier in 2006.
Financial Performance and Outlook:
During the first half of 2006, LRM made significant financial and human resource investments in facilities, equipment and market development activities necessary to position the company for growth. The $2.5 million revenue forecast for 2006 can be achieved, subject to the startup timing for the previously discussed new production line and procurement of anticipated product orders. The recently completed financing package plus available cash will see the company through the build-out phase for the new production line. Methods of financing for a second production line will be explored to meet the demand developed by LRM marketing efforts. Subsequent to startup of the anticipated second production line, we believe that LRM will have built an asset base and track record of operational performance that will support future financing requirements.
The current projected outlook for 2007 is for a revenue forecast of $22 million. This forecast has been approved by the LRM Board of Directors and will be finalized during the 4th Quarter of 2006.
Process Technology Improvements:
In addition to the new 600 ton press that is being installed as a key component of the product development line, several process technology improvements will be added to the new production line being installed in Rockledge. These technical improvements include: higher speed and tonnage presses; the use of a melt-accumulator, a mold-heat management system, a master system controller, high throughput extruders and robotic systems for part removal and trimming. The new advancements will contribute to enhancing process cost effectiveness, quality and capacity, thereby improving our competitive position in the marketplace.
Intellectual Property Protection:
During the first half of 2006, LRM has developed two proprietary product designs and is filing patent applications to protect these new inventions. The company has also completed international filings of the first US issued patents, in an effort to extend protections for its intellectual property abroad. The company has also filed a number of trademark applications to protect the company's identity and position in the marketplace.
Development of Business Systems and Safety:
The company is actively pursuing the implementation of an MRP (Materials Resource Planning) system that will integrate all of the company's operational business functions providing the ability to serve effectively our customer's needs. The company expects to have its MRP system in service prior to year end 2006.
We are very pleased to report that the company completed the relocation to the Rockledge facility without any lost time or OSHA recordable accidents. Additionally, the company has now operated for over 450 days without a lost time accident or OSHA recordable accident. The LRM management team is committed to the principles of Responsible Care and establishing a culture within the LRM organization that values those attributes that are so crucial to creating a successful company with strong competitive capability and staying power. These attributes include a dedication to high-quality efforts in all functions of the company and a determination to protect our employees, contractors, customers and the community through an effective responsible care program.
We thank you for your continued support and interest in both Envirokare and LRM Industries.
Sincerely,
Dr. Nicholas Pappas
Executive Chairman/CEO George E. Kazantzis
Envirokare Tech, Inc. President/COO/Director
Chairman Envirokare Tech, Inc.
LRM Industries, LLC
LRM Industries, LLC was formed to commercialize TPF ThermoPlastic Flowforming(TM) technology through development, manufacturing and licensing. LRM is a joint venture of NOVA Chemicals Inc. and Envirokare Composite Corporation (a unit of Envirokare Tech, Inc.).
TPF ThermoPlastic Flowforming(TM) is an emerging process technology for the low pressure, fully automated molding of long-fiber-reinforced ("LFRT") and unreinforced thermoplastic large structural parts providing enhanced mechanical properties through, with respect to LFRT parts, the randomization and preservation of fiber length in molded parts. LFRT and unreinforced molded products represent two of the fastest growing segments of the worldwide molded plastics market with applications replacing conventional materials such as steel, aluminum, wood, fiberglass and cement, in nearly all major industrial market segments. The worldwide market for LFRT and unreinforced products is estimated to be a multi-billion pound opportunity with double-digit growth rates currently and into the future. The enhanced mechanical properties of TPF ThermoPlastic Flowforming(TM) molded products, coupled with low material costs (including the use of recycled polymers) and low conversion costs, make TPF ThermoPlastic Flowforming(TM) patented technology a strong contender for this multi-billion pound opportunity.
Envirokare welcomes inquiries regarding their products and programs. Interested parties are also directed to the SEC's EDGAR informational system to obtain currently filed Envirokare corporate information. |
