AERT reports widened loss
Posted on Wednesday, August 20, 2008
Advanced Environmental Recycling Technologies Inc. reported a widened second-quarter net loss Tuesday, blaming the poor performance on $ 6. 6 million of payments for legal transactions, regulatory compliance and debt service.
The Springdale manufacturer reported a net loss of $ 7. 75 million, or 16 cents per share, for the quarter that ended June 30, compared with a net loss of $ 383, 919, or 1 cent per share, in the same year-ago period.
It reported revenue of $ 25. 08 million, compared with $ 25. 64 million.
In a conference call, Chief Financial Officer Eric Barnes said the quarter was affected by the expected settlement of a combined lawsuit involving the ChoiceDek brand of deck.
A finalized agreement will be submitted by Thursday for court approval, according to a U. S. Securities and Exchange Commission filing.
The company reported the class-action payments in the second quarter totaled $ 5. 9 million.
Other notable expenditures included a $ 669, 355 late penalty to the SEC and a $ 1 million payment for a 19. 75 percent bridge loan.
The second quarter was a “transition quarter, or a cleanup quarter, ’’ Joe Brooks, AERT’s chairman and chief executive officer, said in the conference call.
We “ wound up focusing and committing to the class-action situation and addressing customer concerns,” Brooks said.
ChoiceDek is a brand of outdoor deck materials owned by Weyerhaeuser Co. However, AERT, which makes ChoiceDek, is in the process of acquiring that brand.
Customers of ChoiceDek who said they found mold on their decks have about six months to become a part of the settlement, according to a July 30 SEC filing.
The product had been advertised as maintenance free, and the group suing AERT wanted the product warranty honored or a refund issued.
Decking materials have been modified to read that periodic cleaning is required as part of the deck’s upkeep, Brooks said.
“We determined that it’s in everyone’s best interest to settle the situation,” he said. AERT has made other changes during the quarter to streamline the business. At the end of July, 29 positions were cut. AERT employed 662 people at the end of 2007, with 645 people based in Arkansas. Also, AERT dropped its inventory levels and unprofitable product lines such as window sills. Sales in the second quarter were affected by the slowdown in new home construction and building materials markets. But Brooks said when the market turns around, the company is expected to benefit. Shares of AERT closed at 49 cents a share, down one cent or 2 percent in Tuesday trading on the Nasdaq. Shares have traded between 48 cents and $ 1. 49 over the past year.
To contact this reporter: lwhalen@arkansasonline. com
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