CARLISLE, Iowa — Tire recycler GreenMan Technologies Inc. is continuing its efforts to put itself back in the black by acquiring Welch Products Inc., a Carlisle-based manufacturer of playground safety tires and other recycled rubber products.
GreenMan purchased Welch Oct. 2 by exchanging 8 million shares of its common stock for 100 percent of Welch´s stock, GreenMan said. The total value of the acquisition is about $2.8 million, analysts said.
Welch has been a major crumb rubber customer of GreenMan for several years, GreenMan said. While Welch makes a range of recycled rubber products including construction molds, roadside anti-vegetation products and highway guardrail spacer blocks, its specialty is the DuroMat Extended Life playground safety tile made with a patented "cold-cure" process to guarantee long life in both extreme heat and extreme cold.
The crux of Welch´s business is its "National Safe Surfacing Initiative," which is dedicated to designing the safest possible playground environments for children, according to Welch´s Web site. DuroMat Extended Life tiles are key to the initiative, Welch said. A federal court recently ruled that wood chips and other loose playground fill violated the Americans with Disabilities Act because they limit the accessibility of playgrounds to handicapped children.
Welch also recently acquired PlayTribe Inc., a playground design, equipment and installation company. GreenMan acquired PlayTribe along with Welch.
On an Oct. 3 conference call, GreenMan CEO Lyle Jensen said the vertical integration of Welch´s business into GreenMan´s will greatly increase the value-added profile of the company.
Tire-derived fuel, which until recently was GreenMan´s emphasis, fetches anywhere from $10 to $80 per ton on the recycled rubber market, Jensen said. Crumb rubber, with which GreenMan supplies Welch and other product manufacturing firms, nets $200-$300 per ton, a boon to the chronically cash-strapped GreenMan.
GreenMan increased its crumb rubber production 60 percent in one year, from 16 million pounds in fiscal 2006 to 26 million in fiscal 2007, according to Jensen. This gives GreenMan a brighter earnings picture on its face, he said, but the acquisition of Welch-whose high-performance recycled rubber products obtain $1,200-$2,000 per ton-promises even bigger profits in the future.
"We´re at a stage now where we can move from product development to volume marketing," Jensen said. "Historically, I think we´ll say we brought these two companies together at the right time."
For the twelve months ended June 30, 2007, Welch and PlayTribe together had combined unaudited revenues of $3.5 million, according to GreenMan. Welch initially will account for about 20 percent of GreenMan´s revenues, Jensen said, but it expects Welch´s sales share to grow with each quarter. The pending expansion of Welch´s market to California in particular promises swift expansion, he said.
Savage, Minn.-based GreenMan expects shortly to issue its financial results for the fiscal year ended Sept. 30. Since Jensen took over as the company´s CEO in May 2006, GreenMan has implemented a multi-phase program to regain profitability through production efficiency, concentrating on core businesses and seeking acquisitions and joint ventures in relevant product areas.
For the six months ended March 31, GreenMan reported a net loss of $657,000 on sales of $8.4 million, compared with a loss of $2.7 million on sales of $7.4 million for the same period a year before.