Q & A with Richard J. Kurtz, Chairman of the Board, LaPolla Industries, Inc.

1) Your last 10Q was for the period ending September 30, 2012. Will you be releasing Quarterly Reports going forward? When will you be releasing your Annual Report?

Our 10-K should be released by April 01, 2013. We have always filed our quarterly reports for the last 14 years.

2) Can you confirm the current number of shares outstanding? Does this include options and warrants? Approximately how much is owned by insiders?

Current shares outstanding and issued – 109,372,266
Options and Warrants – 13,988,407
Insiders Own Approximately – 92,500,000

3) According to the last 10Q LaPolla is operating at a loss. Do you expect profitability in the near future? If so, when and how will it be achieved?

We anticipate profitability in 2013. We are projecting sales above 90M and EBITA 4M+. LaPolla is focused primarily on converting thousands of conventional insulators to Spray Polyurethane Foam. Spray foam is now ready to rapidly accelerate in the insulation market because of high-energy costs, consumer awareness, and LaPolla’s/AirTight’s abilities to successfully transition conventional insulators into the spray foam business.

4) The recent news release regarding 5-year deal with Mark Group Limited is particularly noted for your entrance into the UK markets. What other geographical areas are you looking into? What percentage of total revenue is from foreign sales?

We are currently in the following International Markets: Bahamas, Bermuda, China, Czech Republic, Dominican Republic, Dubai, Egypt, France, Greece, Hungary, Kuwait, Ireland, Italy, Norway, Panama, Poland, Portugal, Qatar, South Africa, Spain, and United Kingdom.

Percentage of total International revenue will be a minimum of 12%. Could be as high as 20% in 2013. Foreign sales in 2014 could be 40M to 50M.

5) Besides foreign sales, what is your plan for growing the company?

We recently started two programs that you can learn more about on our website. One is the Home Retrofit Program. The other is the AirTight™ Program.

Both programs address the 80 million homes in the United States that need proper insulation. The Home Retrofit Program is aimed at homeowners. The AirTight™ Program is aimed at entrepreneurs who want to own their own business, and insulation professionals who want to partner with LaPolla and take advantage of our training, marketing, and superior products.

6) Could you break down for us LaPolla’s most popular products in terms of sales, margins, and profitability?

Our most popular product is our Spray Polyurethane Foam, which is used for the insulation market and as a roofing system. In addition to manufacturing spray polyurethane foam for insulation and roofing, we also manufacture acrylic roof coatings. Acrylic roof coatings are applied over existing conventional roofs and roofing systems. Acrylic coatings extend the life of roofs and create a “cool roof” in climates of heat.

Our margins range between 20% and 25% (depending on the product).

7) Does LaPolla manufacture its own products? How many total employees?

LaPolla manufactures all products in Houston, Texas. We have 71 employees.

8) Is your business model more business-to-business or business-to-consumer? Can you break down your revenue from each?

Our business model is in most cases business to distributors of our products (25%) and direct business to roofing contractors / foam insulation contractors / builders / general contractors (50%). The balance is in international business and miscellaneous business.

9) Are there any financial incentives, tax incentives, rebates, loans, etc. for homeowners who are on the fence about foam insulation?

Many individual states offer financial and tax incentives to homeowners and commercial building owners in order to save energy. These programs are accelerating throughout the United States.

AirTight™ has its own 100% financing program available to homeowners with proper credit offered through AFC First Financial in Allentown, PA. This just began February 01, 2013.

10) What separates your products from other foam products on the market? Why would a homeowner or insulation company choose LaPolla products?

LaPolla’s main product and future is foam insulation. All foam products are similar in many aspects. Our R Value (Heat Resistance) is excellent; however other companies are similar in R Value.

Our largest competitors are Bayer, DOW and BASF, global companies with strong resources and brand recognition, though their insulation divisions are a very small part of their sales.

The spray foam market is a hands-on, relationship driven industry. Many global chemical suppliers, our competition, are not effectively structured to meet fragmented market demands associated with thousands of small “mom and pop” insulation businesses throughout the United States. LaPolla’s size and flexibility provides the dynamics needed to aggressively pursue and effectively participate in such an environment. We are clearly the more aggressive and innovative company.

11) How do you market your products and services?

We market our products with a sales team of 26 personnel and numerous reps. We have excellent customer service with aggressive techniques in all areas of sales. LaPolla markets its spray polyurethane foam and acrylic coatings to contractors, distributors independent representatives and consumers.

Beginning January 1, 2013 our AirTight™ Home Energy Audit Program was introduced in certain locations throughout the U.S. The introduction of the AirTight™ Energy Auditor Program provides the nation with the largest direct to consumer sales force. AirTight™ anticipates in excess of 1,000 Energy Auditors becoming independent sales representatives in 2013 and 2014. This number will accelerate to 5,000 within the next five years.

The Energy Auditor will first audit all utility and electric bills of the homeowner. After a complete inspection and utilizing their building science training, they will be able to determine the air loss in the home and present the AirTight™ Home Retrofit to address the issues uncovered during the audit.  AirTight™ will review with the Energy Auditor the various steps to be taken in order to insulate the home with foam insulation. Foam insulation will be recommended in the attic, various walls, and crawl spaces of the home.

Through AirTight’s financing ability, the homeowner will be able to finance all costs of the Energy Savings Package. It is anticipated that the cost savings of the homeowner’s utility bills will offset most or all of their monthly financing charges. In most cases, AirTight™ will be able to facilitate 100% financing with respect to this program.

The Department of Energy estimates that some 80 million single-family owner occupied homes in the U.S. are in need of being retrofit. AirTight’s Home Energy Audit Program will provide homeowners with a one-source solution to make their upgrades.

12) How is spray foam insulation different from regular insulation in terms of energy and dollar savings? You’ve said that foam insulation even competes favorably with solar energy from rooftop panels, could you elaborate?

It is common knowledge that spray foam insulation is more beneficial then the current “fiberglass insulation” that has been used in homes and buildings for the past 75 years. (Fiberglass insulation was invented in 1938 by the Owens Corning Company.)

There is factual data that we have, showing savings from 35% to 45% in homes and multi-family unit buildings. My colleague, Rob Petersen, CFO of The Kamson Corporation, installed spray foam insulation 2 ½ years ago in his 3,200 square foot home located in Woodcliff Lake, New Jersey. His savings in gas and electric is conservatively 35%.

The same energy savings have taken place in other apartment building complexes owned by The Kamson Corporation. One example is the Dahnert Park Apartments in Garfield, New Jersey. In late 2010, the entire attics and crawl spaces of this apartment complex had spray foam insulation installed.

In 2010, (entire 12 months) gas costs equaled $20,011.17
In 2012, (entire 12 months) gas costs equaled $11,054.13

Depending on location, the construction, and design of the home or commercial structure, the return of your investment of spray foam insulation can be between three and five years.

The cost of solar energy with roof panels is substantially greater. The objective of solar energy is to create less expensive energy at unfortunately a very high cost in investment. Spray foam insulation “contains” energy within the building envelope. The investment to do this savings of energy is probably one-tenth the cost of the investment to create solar energy.

Energy savings is beginning to accelerate within the United States and even greater throughout the world. We believe LaPolla is very well positioned for this acceleration.

Thank you Richard for taking the time in answering these questions. We look forward to LaPolla’s continued growth and progress and wish you great success.

George Pessin, Pennyheaven.com
(Disclosure: I am long LPAD)

For more information see:
LaPolla Industries website:
http://www.lapolla.com/

AirTight™ Spray Foam Insulation by LaPolla: http://www.airtightinsulation.com/

LaPolla YouTube Channel:
http://www.youtube.com/user/lapollaindustries