LYNNFIELD, Mass.—Through strategic purchases, upgrades and expansions, tire recycler GreenMan Technologies Inc. plans to move back into the black in fiscal year 2005.
GreenMan CEO Bob Davis and Chief Financial Officer Chuck Coppa said two moves in particular—the letter of intent to buy certain assets of Orlando, Fla.-based crumb rubber producer TIRES Inc. and the pending upgrade of GreenMan´s LaVergne, Tenn., facility into a full-service crumb rubber plant—promised big things for the company. They discussed these strategic moves during a Jan. 20 teleconference.
Other improvements—such as the November 2004 reopening of the waste wire processing operation in Jackson, Ga., closed by fire since March 31, 2003—are fully functioning, but occurred too late to improve results for the fiscal year ended Sept. 30, Davis and Coppa said.
For the fiscal year, GreenMan reported net losses of $2.6 million on sales of $30.8 million, compared with a loss of $2.9 million on sales of $29.7 million for fiscal 2003. For the fourth quarter, the company lost $834,000 on sales of $9 million, compared with being $386,000 down on sales of $8.4 million the prior year.
Part of the problem in the past year, Davis and Coppa said, was the continuing lack of funds caused by the collapse of Coast Business Credit, GreenMan´s primary lender, in early 2003. The completion of a new $9 million line of credit with Laurus Master Fund was announced in June, but again came too late to help the results for fiscal 2004.
GreenMan announced the deal with TIRES the same day as the teleconference. The company has an exclusive option to buy the TIRES assets over the next 15 to 24 months.
In return for that option, GreenMan issued $200,000 worth of common stock to apply toward the purchase price of the assets.
The company release didn´t describe the assets earmarked for purchase, but it did say GreenMan and TIRES have signed a long-term agreement for GreenMan to lease certain equipment from TIRES and provide the Orlando crumb rubber producer with scrap tires for feedstock. Both companies will use a previously announced "good faith deposit" of $350,000 to prepare and move the leased equipment for use.
TIRES´ annual crumb rubber capacity is nearly 60 million pounds, according to the GreenMan release. With the purchase of these assets and the expansion of the LaVergne facility, GreenMan soon should boast annual crumb rubber capacity of more than 100 million pounds, up from the current 50 million, Coppa said.
GreenMan expects the LaVergne upgrades to go on-stream by March or April, according to Coppa. Another advantage to the LaVergne expansion, Davis said, is that it automatically will remove nearly $100,000 of transportation costs every month, because scrap tires collected in Tennessee previously had to be shipped to Georgia for processing.