Ailing AERT posts $1 million profit

By Laurie Whalen

Posted: July 29, 2009 at 2:57 a.m.

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LITTLE ROCK — Advanced Environmental Recycling Technologies Inc. stemmed a string of 11 consecutive quarters of net losses Tuesday when it reported net income of more than $1 million for the second quarter.

The Springdale manufacturer's stock jumped 65 percent on the news but still ended the day below $1. Profitability came from restructuring that took place in 2008 and assistance from its financial companies, the deckboard manufacturer said in a news release. AERT said further cost reductions were planned for this year.

Joe Brooks, AERT's chairman, said that the manufacturer did not plan further layoffs, but he did not rule out the possibility of future job cuts. "We have to be able to respond to whatever happens with the economy," Brooks said.

In 2008, 150 people lost their jobs, and other measures such as downsizing operations, subleasing facilities and idling excess manufacturing capacity were also implemented, the business said in last year's annual report.

AERT had 514 workers at theend of 2008.

The business, which uses recycled plastic and waste wood, reported a profit of $1.34 million, or 3 cents per share, for the quarter that ended June 30, compared with a net loss of $7.75 million, or 16 cents per share, in the same year-ago period.

AERT is not tracked by an investment group so a quarterly earnings estimate was not available.

Revenue fell 12 percent to $22.09 million compared with $25.08 million in the same year ago period.

In an afternoon conference call with investors Brian Hanna, AERT's chief financial officer, noted the difficulties the business had in the year-ago period.

AERT attributed is second quarter 2008 loss to payments for legal transactions, regulatory compliance and debt service.

Hanna also pointed out that the cost-cutting improved AERT's gross margin by 23 percent.

A plastic-processing facility in nearby Watts, Okla., will lower costs once it opens at the end of the third quarter, the company has said.

AERT said it still needed to resolve liquidity issues.

"We're running on cash flow but expect, now that we've shown some improvement, to refinance longer-term [debt] for our company and its shareholders," Brooks said.

However, Liberty Bank and Allstate Investments have helped by extending AERT's line of credit or by waiving defaulted debt covenants in the second quarter.

The manufacturer said its financial statements were prepared on the basis of a "going concern" even though AERT had a $23.5 million working-capital deficit and a $4.4 million stockholders' deficit at the end of the second quarter.

"The ability of the company to continue as a going concern is dependent upon the ongoing support of its creditors, investors and customers," the company said in its Securities and Exchange Commission document filed Tuesday.

The Springdale business is scheduled to meet with Nasdaq regulators on Aug. 6 to work out an agreement to keep it listed on the country's largest electronic stock exchange.

AERT remains out of compliance with Nasdaq's shareholder equity rule and a minimum $1 closing-bid price rule.

AERT shares rose 19 cents, or 65 percent, to 48 cents per share Tuesday on the Nasdaq. Its stock has traded as high as 75 cents and as low as 3 cents over the past year.

To contact this reporter:

lwhalen@arkansasonline.com

Business, Pages 23, 24 on 07/29/2009

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