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Author: OnTheRivet Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 46826  
Subject: Cohesant Technologies The Business Date: 3/12/2005 4:17 PM
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For those of you who don't know there are several of us trying to get some new research projects going. We have already completed the first part which was joespeaks recommendation of the stock. He is long this stock as of last post and although he didn't say it he had implied we can make some serious cash with it. Ok maybe not but lets pretend.

So the next part we want to examine what the company actually does. Please enjoy

The Business

Cohesant Technologies COHT
http://www.cohesant.com

I highly recommend going to their website and to the subsidiaries website for a visual on the products that they sell. It makes the 10-K's business description much easier to understand

Cohesant Technologies

Cohesant Technologies was formed in 1994 and operates via two wholly owned subsidiaries Glass-Craft Inc. and Raven Lining Systems. As of last fiscal year ending December 2004 they had $19.3 million in sales and a market cap of $27 million. They hade 74 full time and 4 part employees.
Their sales are 72 percent in the US and the rest abroad.

They are basically engaged in two activities. Their main source of revenue is manufacturing specialized equipment that dispenses hi-tech epoxies and grout products. Their secondary source of revenue is the sale of the epoxies and grout products themselves. Equipment and Replacement parts accounted for 70% plus of their business with the remainder in epoxy and grout products used in the equipment.

Glass-Craft Inc. (there is much more detail in the SEC docs but I don't want to regurgitate their obfusication)

Glass-Craft operates in Indiana. It sells its 2 component dispense equipment to be used typically with multiple component formulations such as fiberglass, reinforced plastic or polyurethane. Their customers are in the construction, transportation and marine industries.

There uses include equipment to apply insulation, protective coating, sealant and anti-corrosive products. Also their equipment is design to inject into closed and open molds to make things like fiberglass shower basins, boat hulls, and smaller custom items like hockey mask's.

My guess is that there are several types of customers. Many who are OEM's that are making products and need the equipment in the process like fiberglass boats or tubs. There are also I am sure individual contractors that are hired to spray new construction with a protective coating. The same goes for contractors in the transportation industry. A picture on their website shows a large recreational vehicle that has had a protective coating sprayed over it. Have you ever seen those spray on liners for truck beds. That sort of stuff.

One note is that Glass-Craft is selling material that contains volatile organic chemicals (VOC's) which is heavily regulated by the EPA and OSHA. Much of their new business is generated by companies updating equipment to meet newer code requirements such as low waste and VOC emissions. I think this works in Glass-Craft's favor.

Raven Lining Systems.

Raven Lining Systems operates in Oklahoma. They are also engaged in the manufacture of two part dispenser systems and application of epoxies and insulation. However their business focuses more on application on industrial facilities that face harsh environmental conditions. There products are "used in the construction, repair,rehabilitation and maintenance of food processing and water storage structures, wastewater treatment and collection systems of municipalities and industrial and recreational facilities ... [and] ... are ideally suited for the rapidly growing market in underground rehabilitation of infrastructure." (taken from their 10-K).

Raven AquataPoxy Products do not contain VOC's so regulation isn't as large a part of the business.

An interesting fact is that to operate Raven equipment you must be a certified applicator of which they had 44 domestic and 1 international as of last 10-K. (I find that a number worth tracking to measure growth by)

How do I buy Cohesant Technology Wares

Cohesant sells its products through independent distributors. Doing a search on the web I found a couple. They do sell direct to their larger customers and OEM clients.

And as a wrap-up I believe that this a very straightforward business to understand. I didn't come across anything tricky. I also like the add on sales that generate with the epoxies so that they have continual repeat business always keeping them around their customers. Consumables and equipment that wears and tears, gotta like it.
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Notes:

Equipment looks garage built. Definitely the impression of a small company.
10-K easy to read and disclosures looked decent on first read through.
Management has some related party transactions that warrant closer inspection
Stock Options are all over the place it seemed like
Management said current facilities were adequate

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PS. If this didn't make sense or you have a question just ask. I think I have a decent understanding of their business but might not have explained it well.
Thanks

Matthew
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