RediShred Capital Corp.
Annual Report 2015

Plain-text annual report

ANNUAL REPORT 2015   2015  HIGHLIGHTS     (All  in  Canadian  Dollars  unless  otherwise  stated)   • Service   related   system   sales   for   2015   increased   by   21%   over   2014   (US   Dollars),   as   the   system   continued   to   invest   and   marketing   activities.   sales   in   • Total  system  sales  in  2015  were  $24.9   million   (US   Dollars),   which   was   an   increase   of   21%   over   2014’s   results;   the   system   continued   to   destroy   increased   volumes   of   paper,   saving   17%  more  trees  in  2015  from  recycling   activities  versus  2014.   7  YR  CAGR  =  17%   • Corporate   locations   generated   $5.9   million  in  Revenue  and  $2.5  million  in   Earnings   Before   Interest,   Taxes   and   Depreciation   (“EBITDA”)   for   the   12   months   ended   December   31,   2015.   Corporate   location   EBITDA   grew   by   18%  over  2014.   resources   with   a   view   • Continued   to   invest   in   marketing   and   sales   to   attaining   drive   brand   awareness   and   lead  flow  and  conversion  to  sales.   • Awarded   the   Minnesota   franchised   operations   location   commenced  in  February  2016.     2015;   in   • Acquired   the   RecordShred   Business   in   South   Florida   on   December   31,   2015,   expanding  our  service  capability  three   fold.   • Expanded   partnership   with   American   Cancer   Research,   by   holding   our   second   nation   wide   Shred   Event   on   June   6,   2015.     In   2015,   PROSHRED®   raised   in   excess   of   $50,000   for   this   important   cause.   our   Institute   for   Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.               ANNUAL REPORT 2015   TO  OUR  SHAREHOLDERS   On   behalf   of   the   Board   of   Directors,   I   am   pleased   to   present   the   2015   Annual   Report   for   Redishred   Capital  Corp.  (“Redishred”  or  “Company”).     Redishred  is  a  publicly  traded  investment  company  listed  on  the  TSX  Venture  Exchange  focused  on  the   information  shredding  and  recycling  industry.    Redishred  currently  owns  and  operates  the  PROSHRED®   system   in   the   United   States   and   Internationally.       PROSHRED®   is   the   pioneer   of   on-­‐site   document   destruction   and   has   27   locations   in   operation   throughout   the   United   States   and   operates   in   five   countries  in  the  Middle  East,  as  of  December  31,  2015.     PROSHRED  -­‐  World  Wide  Locaaons   US  -­‐  Franchised   US  -­‐  Corporate   Internaaonal   40   35   30   25   20   15   10   5   0   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016F   (1)   (2)   The  information  prior  to  the  March  17th,  2008  qualifying  transaction  was  obtained  from  the  predecessor  Company.     Management’s  forecast  for  the  year  ended  December  31,  2016.     Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.             ANNUAL REPORT 2015   PROSHRED®  is  focused  on  maximizing  revenue  and  profit  growth  by:     (1)   Supporting   our   franchisees   by   way   of   delivering   programs   aimed   at   growing   both   their   sales   and   cash  flows.     (2)   Expanding   our   location   footprint   in   North   America   by   way   of   continued   franchising   and   by   location   footprint   located   acquisitions.   We   will   also   expand   our   conducting   strategically   internationally  by  way  of  licensing.   (3)  Increasing  sales  and  marketing  activities  and  focusing  on  route  optimization  in  all  locations.       Our   management   team   is   committed   to   building   the   PROSHRED®   brand,   with   the   view   to   maximizing   shareholder  return  on  investment.       ABOUT  PROFESSIONAL  SHREDDING  CORPORATION  AND  PROSHRED®   Professional  Shredding  Corporation  (“PSC”)  is  a  fully  owned  subsidiary  of  Redishred  that  franchises  the   right  in  the  United  States  and  internationally,  to  sell  on-­‐site  services  for  the  destruction  and  disposal  of   documents   and   other   sensitive   and   confidential   materials   under   the   trademark   PROSHRED®.   Its   customers  are  businesses,  households  and  other  organizations  that  have  a  requirement  to  maintain  the   confidentiality  of  their  proprietary  information,  whether  for  competitive  reasons,  to  comply  with  legal   requirements   or   otherwise.   The   PROSHRED®   system   allows   businesses   and   individual   customers   to   witness  the  destruction  of  their  selected  paper  documents,  computer  disks,  hard  drives  and  other  media   that  contain  sensitive  and  confidential  proprietary  information.       PROSHRED®   is   a   pioneer   in   the   onsite   document   destruction   industry,   commencing   operations   in   Toronto  in  1986.  In  2008,  Redishred  purchased  PSC  and  the  brand  PROSHRED®  from  The  Heron  Group  of   Companies.  With  this  acquisition,  Redishred  immediately  obtained  a  solid  platform  that  could  and  has   demonstrated  the  ability  to  support  footprint  growth.    The  platforms  that  were  purchased  included  the   PROSHRED®  system  and  trademarks,  programs,  and  the  go-­‐to-­‐market  methodology.     Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.               ANNUAL REPORT 2015   2015  SUCCESSES   During  the  volatile  economic  environment  of  the  last  five  years  we  have  seen  opportunities  to  continue   to   grow   our   businesses,   not   only   in   the   United   States,   but   internationally.   Some   of   our   key   successes   from  last  year  include:   • Increased   year   over   year   service   related  system  sales  that  grew  by  21%   versus  the  previous  year;   • Posted  operating  income  of  $1.77M  in   2015,   an   increase   of   35%   over   the   previous  year;   • The  introduction  of  our  12th  dedicated   Hard   Drive   Shredding   Truck   in   the   PROSHRED®  system;   • Our   system   continued   its   green   efforts,  saving  545,000  trees  by  way  of   recycling  shredded  paper;   • Awarded   one   new   Franchise   in   Minneapolis,  Minnesota;   • Acquired   the   RecordShred   business   in   the   in   Florida   by   33   South   Florida,   PROSHRED®   fleet   percent;   increasing   Continued   Growth   in   Service   Revenue   –   The   PROSHRED®   system   continued   to   grow   in   2015,   with   service  related  system  sales  (revenues  generated  from  providing  secure  shredding  service  to  customers   and  does  not  include  recycling  related  revenues)  growing  at  a  rate  of  21%  over  the  previous  year.    This   strong  growth  in  service  related  system  sales  is  due  to  PROSHRED®’s  focus  on  strong  customer  service,   its  dual  certifications  (ISO  9001  and  NAID  AAA),  and  the  education  of  it’s  clients  on  the  security  benefits   of   using   the   PROSHRED®   information   destruction   service   on   a   regular   and   recurring   basis.   It   is   PROSHRED®’s  plan  to  continue  building  service  related  revenue  by  focusing  on  client  education  at  the   local  level,  by  way  of  continued  sales  and  marketing  training  programs  and  by  enhancing  and  increasing   our  marketing  initiatives.     Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.           ANNUAL REPORT 2015   Quality   and   Brand   –   PROSHRED®   continues   to   be   the   only   national   onsite   document   destruction   company   in   the   United   States   to   be   ISO   9001   Certified   for   international   standards   in   quality   and   customer   satisfaction.   The   certification   was   renewed   in   2015.   In   addition,   all   of   our   franchise   and   corporate  locations  in  operation  are  NAID  AAA  certified.    These  certifications  are  the  core  of  our  client   satisfaction  programs,  which  are  measured,  monitored  and  improved  on  a  continuous  basis.   PROSHRED®   remains   committed   to   our   core   values   of   honesty   and   transparency   in   our   pricing   communications   with   our   customers.   As   a   result   we   do   not   typically   include   fuel,   insurance   or   administrative  surcharges  in  the  price  of  our  on-­‐site  shredding  services.       Commitment  to  Communities,  Social  Causes  and  our  Environment  –  PROSHRED®’s  core  values  include   commitment   to   the   communities   we   serve   and   a   commitment   towards   a   cleaner   and   greener   environment.       During   2015,   PROSHRED®   franchisees   and   corporate   locations   conducted   201   community   shredding   events.     These   events   are   aimed   at   educating   consumers   on   the   serious   ramifications   of   identity   theft   while  simultaneously  allowing  consumers  to  destroy  their  confidential  documents  on  site  and  in  a  green   manner.    Our  community  shredding  events  are  often  conducted  in  association  with  local  charities  raising   funds  for  their  worthy  causes.       On   June   6,   2015,   PROSHRED®   conducted   its   very   first   national   shredding   event   to   raise   funds   and   awareness   for   the   American   Institute   for   Cancer   Research   (“AICR”).     This   event   was   and   is   inspired   by     our   former   franchisee,   David   Wright,   in   Charlotte,   North   Carolina.     In   2015,   PROSHRED®   raised   over   $50,000   on   behalf   of   AICR.     Our   2016   Shred   Cancer   Event   will   be   on   June   4,   2016,   please   visit   www.proshred.com/aicr  for  more  information.   An  important  byproduct  of  the  PROSHRED®  service  is  the  shredded  paper.  All  paper  that  is  shredded  is   also  recycled,  and  as  a  result,  PROSHRED®  locations  shred  36,000  tons  of  paper  in  2015,  saving  545,000   trees.   Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.                   ANNUAL REPORT 2015   2015  CHALLENGES   Paper  Prices  –  During  the  last  quarter  of  2015,  driven  by  a  drop  in  overseas  demand  and  overall  global   declines   in   commodity   prices,   recycled   paper   prices   dropped   by   18%   versus   the   4th   quarter   of   2014.   Paper   pricing   has   continued   to   be   soft   for   the   last   four   years,   with   Q4-­‐2015   being   the   lowest   pricing   point  since  early  2009.  PROSHRED®’s  response  to  this  challenge  has  been  to  focus  its  sales  strategy  on   building  strong  route  densities,  selling  recurring  service  and  by  providing  peerless  customer  service.  By   building   strong   route   densities,   we   can   and   have   increased   our   truck   utilization,   thereby   reducing   our   cost  per  stop  and  remaining  competitive  during  upward  paper  pricing  cycles.       Franchise  Development  –  The  PROSHRED®  franchise  model  is  capital  intensive,  as  it  requires  significant   investment   in   equipment   and   human   resources   to   launch.     The   typical   franchisee   candidate   has   a   net   worth   of   at   least   $1.5M.     The   United   States   credit   markets   continued   to   be   a   challenge   for   small   businesses,   restricting   access   to   capital   for   potential   franchisees,   hence   reducing   the   pool   of   qualified   candidates.    In  order  to  respond  to  this  situation,  PROSHRED®  has  invested  in  (a)  supporting  our  existing   franchisees,   as   they   drive   the   validation   process,   (b)   building   stronger   relationships   with   business   brokers   with   the   aim   to   increase   the   quantity   of   quality   candidates   that   explore   the   PROSHRED®   business   opportunity,   and   (c)   management   continues   to   work   with   various   financing   brokers   and   advisors  with  the  goal  to  open  new  financing  channels  for  new  and  existing  franchisees.   REDISHRED  CAPITAL  CORP  AND  PROSHRED®  MOVING  FORWARD   Strategy   PROSHRED®  will  spend  the  next  fiscal  year  focusing  on  our  core  strategies  as  follows:   • Continuing   to   enhance   the   PROSHRED®   system   with   the   view   of   increasing   franchisees’   sales   and   cash   flows   by   providing   sales   and   marketing   support   to   all   franchisees   and   corporate   locations;   • Leverage  our  buying  power  to  reduce  the  costs  of  our  Franchised  and  Corporate  locations;     • Recruiting  and  awarding  new  franchise  locations  in  the  United  States  by  continuing  to  invest  in   franchise  marketing  activities  and  develop  stronger  relationships  with  business  brokers;   Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.             ANNUAL REPORT 2015   • Conducting   acquisitions   in   key   markets   with   a   view   to   driving   service   depth   in   a   market   or   region;   • Continuing   to   implement   our   new   workflow   management   software   with   enhanced   routing   capabilities;   • By   being   involved   in   our   communities   by   way   of   supporting   local   and   national   charities,   conducting  shredding  events  and  continuing  to  recycle  the  paper  and  other  materials  collected   and  destroyed;  and   These  activities  are  aimed  at  (1)  increasing  our  national  footprint  in  the  United  States,  (2)  continuing  to   grow   system   sales,   (3)   enhancing   Redishred’s   cash   flows,   and   (4)   contributing   to   the   communities   we   operate  in.    Our  goal  for  2015  is  to  generate  EBITDA  of  $2.53M  for  Redishred  Capital  Corp.   We   believe   that   our   strategy   will   allow   us   to   continue   to   grow   our   revenue,   expand   our   footprint   via   franchising  and  acquisitions  and  continue  to  grow  our  net  income  and  cash  flows  from  operations.       In  closing,  the  management  team  of  Redishred  Capital  Corp.  would  like  to  thank  our  hard  working  and   dedicated   franchisees   and   employees   for   their   efforts   and   support   in   growing   the   PROSHRED®   brand.     Furthermore,   we   would   like   to   thank   our   board   of   directors,   shareholders,   suppliers   and   most   importantly  our  customers  for  their  ongoing  support.    PROSHRED®  continues  to  demonstrate  that  it  is   the  system  of  choice  for  on-­‐site  information  destruction,  and  we  are  looking  forward  to  continuing  our   growth  in  2016  and  onwards.   Jeffrey  Hasham   Chief  Executive  Officer   Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.                       ANNUAL REPORT 2015   INFORMATION   Redishred  Capital  Corp.  –  Home  Office   Proshred  Franchising  Corp.     Toronto,  Ontario   6559  Mississauga  Road,  Suite  B   Mississauga,  Ontario,  Canada,  L5N  1A6   Syracuse,  New  York   6067  Corporate  Drive     East  Syracuse,  NY  13057   Albany,  New  York   164  Montgomery  Street   Albany,  NY  12207   Milwaukee,  Wisconsin   1425  Commerce  Ave  –  Unit  C   Brookfield,  WI  53045   Miami,  Florida     201  South  Biscayne  Blvd  Suite  2800   Miami,  FL  33131   Redishred  Acquisition  Inc.  –  US  Offices:   New  York  City,  New  York   5  West  Main  Street  Suite  #200   Elmsford,  NY  10523   Syracuse,  New  York   6067  Corporate  Drive     East  Syracuse,  NY  13057   Charlotte,  North  Carolina   803  Pressley  Rd  -­‐  Suite  108   Charlotte,  NC  28217   Fort  Lauderdale,  Florida   2300  NW  30th  Ct   Fort  Lauderdale,  FL  33311   Averda  LLZ  –  Middle  East  Master  Licensee  Office:   Dubai   Business  Central  Towers  (Tower  B,  Level  37)     Media  City   PO  Box  38180,  Dubai,  UAE   Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.                                                               ANNUAL REPORT 2015   MANAGEMENT   Jeffrey  Hasham   Jack  Pulkinen     Ronald  Gable   Joseph  Morana   Chief  Executive  Officer   Chief  Financial  Officer     Senior  Vice  President  Performance  and  Operations   Vice  President  of  Business  Development  and  Client   Care   Mark  MacMillan   Managing  Director   Our  Value  Proposition:  PROSHRED®’s  sophisticated  technology,  backed  by  over  25  years  of  experience   in  information  and  materials  destruction,  consistently  and  reliably  provides  the  best  information   security  and  liability  protection  for  our  clients.                          

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