One man’s junk is another man’s treasure. — Proverb OWEGO — On Jan. 22, Adam Weitsman, CEO and owner of Upstate Shredding, LLC. and sister company Ben Weitsman & Son, Inc., announced the acquisition of Jack’s Recycling located in Mt. Morris, Penn. Jack’s, an auto and scrap business recycling ferrous and non-ferrous materials, is located […]
One man’s junk is another man’s treasure. — Proverb
OWEGO — On Jan. 22, Adam Weitsman, CEO and owner of Upstate Shredding, LLC. and sister company Ben Weitsman & Son, Inc., announced the acquisition of Jack’s Recycling located in Mt. Morris, Penn. Jack’s, an auto and scrap business recycling ferrous and non-ferrous materials, is located 65 miles south of Pittsburgh. Weitsman bought the scrap yard from Rick Smith in an all-cash transaction. The acquisition at Mt. Morris marks Upstate’s 17th location. The deal should close in 30 days.
Even though the enterprise is known as Upstate Shredding and Ben Weitsman, each location is structured with an operating company and a real-estate company.
Weitsman has ratcheted up the pace of his acquisition activity just in the last 13 months. In December 2012, the company bought the Ferromet site in New Castle, Penn., followed by the announcement in the same month with the signing of a long-term lease for 18 acres in the port of Albany. (The 20-year lease is valued at $6.8 million.)
In July 2013, Weitsman scooped up Valley Recycling in Allegany County, in August he bought Reamer Recycling, Inc. in Ithaca. In January 2014, he closed on the Hornell Waste Material Co. in Hornell and announced the Mt. Morris deal and the acquisition of Capitol Scrap in Albany, which closed in February. Upstate Shredding is also currently negotiating a deal in Wilkes-Barre, Penn.
The rapid pace of acquiring scrap and recycling yards is being driven by Weitsman’s decision to invest in new shredders. “The Albany deal is something I have dreamed about for 14 years,” says Weitsman. “Until now, the company was forced to use competitors such as Schnitzer [Steel Industries, Inc.], which controlled access to loading our materials on ships. Albany is so important to our strategy that we didn’t buy a company to start. We opened the yard in August of last year, and I was shocked with the reception. Customers lined up an hour before we even opened. I anticipated 100 to 125 customers a day, not the 350 to 400. Within four months, Albany became our number one yard based on the customer count.”
The success of the Albany yard spurred Weitsman to modify his plans. “I had planned on ordering a shredder for New Castle, but the Albany demand convinced me to order a shredder for the Capital Region first,” continues Weitsman. “Upstate ordered the shredder in November 2013, and we expect to go into production by April of this year. The shredder, the infrastructure, and the downstream investment are a $25 million commitment.”
To assist with that initiative, the company needed more land. Upstate Shredding/Ben Weitsman announced on Feb. 21 that the Albany Port District Commission voted 5-0 in favor of Ben Weitsman of Albany LLC to lease additional land in the Port of Albany. The new 12-acre site, located at 700 Smith Boulevard, is on the same road as the current 18-acre Ben Weitsman retail scrap yard and port facility.
Upstate Shredding commissioned the Wendt Corporation of Buffalo to build the 2,500-horsepower shredder and downstream sorting to recover wire, plastics, non-ferrous metals, and other materials. Weitsman financed the deal, in part, with a $12 million loan from a banking syndicate headed by the Syracuse office of First Niagara.
Concern for bringing the Albany shredder on line has not slowed Weitsman’s appetite for other investments. “Now that Albany is coming on line, we went ahead and ordered another 2,500-horsepower shredder for New Castle, which should be operational in the fourth quarter of this year. These shredders and the 10,000 horsepower mega-shredder in Owego have a huge appetite for scrap. Our feeder scrap yards are economical if they are located within 200 miles of a shredder. In Albany, I need at least four feeder yards to keep the shredder busy. In Pennsylvania, the plan is to expand west from Scranton to Pittsburgh.”
At the same time, the CEO of Upstate Shredding is in negotiations with Kinder Morgan, the third-largest energy company in North America, which holds the master lease at the Port of Newark. “I think it may take up to two years to ink this deal,” opines Weitsman. “Newark is important, because we can load our ships in Albany and top them off in Newark before they proceed down the East Coast or overseas.” Currently, 95 percent of Upstate Shredding’s sales are domestic, based on the premium prices paid for scrap materials.
Weitsman’s approach to growing Upstate Shredding has been defined by business consultants as a lily-pad strategy. An entrepreneur decides that a market is large enough and the timing is right to grow rapidly. Scrap recycling is a $100 billion business in America, and the prices for scrap are at an all-time high. In addition, except for a few very large publicly held companies, scrap recycling is a still largely a mom-and-pop business with a generation of owners looking for an exit option. The solution for the entrepreneur is to broaden the product footprint. That means jumping to the lily pad near you, rather than trying to jump across the pond, while leveraging your existing customers and creating more items to sell from the scrap processing.
Weitsman is also in an excellent position to finance his growth, because he is funding most of his acquisitions and improvements from cash flow. Not only is he not burdening the company with outsized indebtedness, be he is also not distracted by spending a lot time chasing after investors. Finally, Weitsman has been assembling a professional team in anticipation of scaling up the enterprise, including Stephen Green as the president; Joel Root as a vice president and senior buyer; Dan Innarella as CFO; Bill Dizer as a vice president for the Main Street operation in Owego; Kim Weitsman to handle accounts receivable and rail shipments; Natassia Bowman as the export manager; and Stephen Donnelly as the director of marketing and public relations.
Perhaps most unusual is Weitsman’s ability to manage both the cash and human capital of Upstate Shredding without bringing in an outside CEO.
The pace of Upstate’s growth is impressive. When Weitsman joined his father in the late 1990s, Ben Weitsman & Son generated $3 million in annual sales. “In 2013, the company generated $750 million,” asserts Weitsman. “This year, I expect we’ll reach the $1-billion level. When I joined my father, we had 30 employees in two locations. Now we have 400 in 17 locations, and most of that growth came within the last five years. In fact, we have doubled our sales and geography just in the past three years. We currently process 100 million tons of ferrous metals and 200 million pounds of non-ferrous material.” Weitsman bought the company from his father in 2005. His grandfather started the business in 1938. Today, Upstate Shredding is the largest, privately held, scrap-metal processor on the East Coast.
As Upstate accelerates its growth, the competition seems to be struggling. Upstate’s competitors include two publicly traded companies — Sims Metal Management, Ltd. (OTC: SMSMY) and Metalico, Inc. (NYSE: MEA). Sims reported a net loss of $426.6 million in the fiscal year ending June 30, 2013, following a $638.1 million net loss the previous year, according to Yahoo Finance data. Meanwhile, Metalico’s stock is trading at below $2 a share (as of Feb. 11), down about 50 percent from two years ago and off more than 70 percent from its early 2011 level above $6 a share.
Privately held European Metal Recycling Ltd. (EMR) is another competitor. The UK–based company says on its website that it employs 3,500 people at 150 locations around the world. That includes two facilities near Albany and one in Poughkeepsie.
Keys to success
Weitsman’s explanation for his success is straightforward: “I have kept my debt low, we’re a non-union company, and we’re agile, adapting quickly to changes in the marketplace.” He then adds in a blog: I like to win … We have taken a company in a town of 4,000 [people and] gone head to head with the biggest companies in the world and kicked them in the head really, really hard (Weitsman, in another blog, refers to a different part of the competition’s anatomy.) … I really get off competing against these guys who underestimated us … They can’t beat my team’s passion to win.”
Weitsman, 45, has grown his business over the last 15 years without asking for any government assistance. His prospects for continued rapid growth are excellent, considering on the day I interviewed him he had on file 131 solicitations from scrap-yard owners eager to sell their businesses. He is also buoyed by the prospect that the economic climate overall should improve in 2014, increasing the demand for recycled scrap.
Adam Weitsman has certainly proved the proverb that one man’s junk is another man’s treasure. In the process, he is shredding the competition.
Contact Poltenson at npoltenson@cnybj.com