Tire recycler finds success forging new roads for rubber
Liberty Tire Recycling LLC is marking a milestone in its growth as the largest processor of scrap tires in the United States.
It's recycling office space, in a manner of speaking, as it moves into the Seagate Building in the Strip District.
The 11-year-old company is doubling its office space by taking the fourth floor of the building that was a research center for Cupertino, Calif.-based Seagate Technology LLC until 2009.
Liberty Tire Recycling has undergone tremendous expansion in the last several years in an industry that finds uses for the hundreds of millions of tires American motorists discard each year, CEO Jeffrey Kendall said. Those uses include serving as fuel for cement kilns, a mulch substitute and an ingredient in asphalt, among others.
"Liberty has stuck with the fundamental strategy of buying successful companies with strong management, and with the support of strong capital partners ... we have focused on increasing the value of the recycled rubber," Kendall said.
Since 2008, the company has tripled its revenue, mostly through acquiring other tire recyclers around the country, and expects to post sales this year of $300 million. It operates in 19 states and three Canadian provinces and has 1,800 employees. It has acquired more than 45 companies since 2000, Kendall said.
Kendall and business partners Donald Rea and Andy Russell, the former Pittsburgh Steelers linebacker, formed Liberty Tire in 2000 with the purchase of two North Carolina scrap tire recycling companies. The three had been acquiring, consolidating and selling solid waste companies since 1990 and didn't give tire recycling their undivided attention until they sold their last solid waste company in 2007, Kendall said. After retiring from the NFL in 1976, Russell formed Russell, Rea & Zappala, which specialized in underwriting bond issues to fund school building projects and highway construction. That business was sold to J.P. Morgan.
"They have a very significant presence in the marketplace," said Michael Blumenthal, vice president of the Rubber Manufacturers Association, a Washington trade group. Blumenthal estimated that Liberty Tire handles about half the tires discarded each year nationwide.
Other companies have tried to mimic Liberty Tire's strategy of growing through acquisitions, he said. "And they've failed."
"They're buying quality companies that have established areas and established markets and integrating them into a system," he said. "On that level, they've done it better than anyone else."
The scrap tire business didn't exist until 1986, when Minnesota passed the first state law outlawing the dumping and landfilling of old tires. By 1992, 48 states had some kind of scrap tire law. The market was created by tire retailers who needed to pay someone to pick up and dispense with old tires. Blumenthal said the industry took off in the 1990s as shredded tires began being used under playgrounds and sports fields and in some products.
In 1990, there were an estimated 1 billion "stock piled" scrap tires in the United States. By last year, according to the Rubber Manufacturers Association, that number was cut to about 110 million. An estimated 98 percent of discarded tires were recycled in 2009, up from 96 percent in 2005. An estimated 290 million tires are discarded by Americans every year.
"Virtually all the tires now are picked up and handled by someone," Kendall said.
But not all companies that wade into the industry are successful. There are three main challenges to running a tire recycling business, he said: establishing relationships with tire retailers to ensure a reliable supply of tires; maintaining sufficient capital to buy and operate tire shredding equipment; and findng buyers for all the shredded material.
Successfully meeting the last challenge is the key driving the increasing profitability of Liberty Tire, Kendall said.
"The opportunity is really in what you can do with the rubber," he said.
Roughly shredded tires can be sold as a fuel source to be burned in cement kilns or power plants. More finely chopped used rubber is purchased for use as an aggregate material that can replace sand or gravel. Tires ground into what those in the industry call "crumb" can be used as a feedstock for asphalt, mats and other products. Crumb has been the most profitable, Kendall said.
It's a market that Liberty Tire and others in the industry are trying to grow, Blumenthal said. "The addition of rubber to any of these lines can add some unique characteristics and that has the highest return on investment," he said.
Kendall said: "That's where the growth of the industry is going to be."Additional Information:
About Liberty Tire Recycling
What: Largest scrap tire recycling company in U.S.
Where: Seagate Building, Strip District
Operations: 38 plants in 19 states and three Canadian provinces
Founded: In 2000, by Jeffrey Kendall, Donald Rea and Andy Russell
Employees: 1,800; 50 in Pittsburgh
Tires processed/year: 130 million
Annual sales: $300 million
-- Jeffrey Kendall, chief executive officer
-- Donald Rea, president
-- Andy Russell, vice president
-- Ronald Carlson, vice president of acquisitions
-- John Graham, chief operating officer
-- Dale Van Steenberg, chief financial officer