MINNEAPOLIS, May 6, 2013 /PRNewswire/ -- Appliance Recycling
Centers of America, Inc. (NASDAQ: ARCI), a leading provider of
appliance retailing and recycling services, today reported
operating results for the first quarter ended March 30, 2013.
Total revenues increased 3.3% to $30.4
million versus $29.4 million
for the first quarter of 2012. Overall, the Company reported
consolidated net income of $0.2
million, or $0.03 per diluted
share, compared with near-breakeven results in the first quarter of
2012.
"These results – including our return to profitability –
demonstrate solid progress executing the strategic initiatives we
outlined earlier this year," said Edward R.
(Jack) Cameron, president and chief executive officer of
ARCA, Inc. "In particular, strong replacement program activity
helped our recycling revenues increase 21 percent sequentially and
58 percent over the same period last year."
Cameron added that the Company was pleased to modify its credit
agreement with PNC Bank, National Association (PNC) during the
quarter. The agreement signed on March 14,
2013, extended the Company's existing credit agreement with
PNC two additional years until January 24,
2016. It also waived the previously reported default caused
by being out of compliance with two financial covenants and reset
the financial covenants. The modified terms did not change the
maximum borrowing amount of $15
million under the revolving line of credit and require the
Company to meet monthly minimum EBITDA targets through 2013.
ApplianceSmart® same store sales for the first
quarter of 2013 declined 7% compared with the same period of 2012.
Factors included delayed 2012 tax refunds, negative impact of the
Easter holiday shifting to the first quarter this year and a tight
housing market that dampened relocation activity and related
appliance purchasing. The National Association of Realtors reported
a 17% decline in housing inventories in March 2013 from prior-year levels. The National
Retail Federation blamed a sequential March decrease in electronics
and appliance store sales on colder-than-normal weather and the
payroll tax hike.
In the first quarter, ApplianceSmart total retail revenues
decreased 9% to $18.1 million
compared with the same period of 2012, resulting primarily from the
same store sales decrease and closure of two stores late in 2012.
During the first quarter of 2013, ApplianceSmart stores generated
an operating income before corporate overhead of $0.4 million, a $0.2
million decline compared with the same period in 2012.
"Our retail operations showed quarterly sequential improvements,
including per-store sales and gross margins," explained
Brad Bremer, president of
ApplianceSmart. "We're starting to see more out-of-carton product
available, aided by favorable home-construction trends." The
housing shortage and improving economy is spurring construction;
new housing starts rose in March 2013
at the fastest seasonally adjusted annual rate in nearly five
years.
Recycling revenues, which are comprised of appliance recycling
fees and appliance replacement program revenues, increased 58% to
$8.3 million in the first quarter of
2013, from $5.3 million in the same
period of 2012. The number of replacement programs remained
unchanged, but related revenues increased $3.8 million while appliance recycling fees
declined $0.8 million. The Company
reported a 119% increase in replacement units and a 4% decline in
overall recycling volumes. The increase in replacement program
revenues was partially offset by lower appliance recycling
revenues, resulting in a $0.7 million
improvement in operating profit compared with the same period in
2012.
Research by the Association of Home Appliance Manufacturers
(AHAM) claims the next opportunities for increases in appliance
efficiency will come from smart appliances and early retirement of
existing appliances, such as the 42% of working refrigerators
estimated to remain on the electrical grid after disposal through
secondary use, sale or donation. A 2012 ENERGY STAR®
summary of energy-efficiency programs includes more than 650
incentive and promotion programs submitted by over 200 program
sponsors across the United States.
New ENERGY STAR requirements take effect in 2014.
The Company's byproduct revenues, excluding AAP, declined to
$1.5 million compared with
$1.7 million in the first quarter of
2012. The decrease was a direct result of the 4% reduction in
overall recycling volumes cited earlier coupled with a 14% decrease
in steel scrap prices compared with the first quarter of 2012.
Scrap prices are expected to remain volatile for the balance of the
year and into 2014.
Revenues from the ARCA Advanced Processing (AAP) joint venture,
reported in byproduct revenues, declined 5% to $2.6 million compared with $2.7 million in the first quarter of 2012. AAP's
gross margin declined to 12.2% compared with 19.2% in the same
period of 2012. AAP's operating loss for the first quarter was
$53,000 compared with operating
income of $65,000 during the same
period of 2012. The decline in gross margin and operating income
was primarily the result of lower prices for steel scrap and higher
depreciation expense.
Positive momentum continues in California's cap and trade program for carbon
emissions. In mid-April, California's Air Resources Board approved
linking with a similar program in Quebec, starting in 2014. The Company
considers this an important step toward a more efficient, liquid
and stable carbon emissions market, including possible future
linkages to other domestic or global markets. As previously
announced, both ARCA and AAP expect to create carbon offsets
through the destruction of CFCs throughout 2013 and derive revenues
through California's market in the
second half of 2013.
Overall gross profit as a percentage of total revenues decreased
to 26% for the first quarter of 2013 compared with 27% during the
same period of 2012. The decline in overall gross profit percentage
resulted primarily from lower byproduct revenues and the decline in
AAP's gross margin. These factors were partially offset by an 80
basis point improvement in ApplianceSmart's gross margin.
"We're encouraged by a positive start to the year," Cameron
noted. "Our banking agreement is solidified and we've moved ahead
with a number of corporate actions that are bearing fruit." He
concluded, "We're carefully managing all our operations and we're
optimistic about our prospects as the economy gradually improves
throughout 2013."
Liquidity and Capital Resources
Cash and cash equivalents as of March 30,
2013, were $3.9 million
compared with $3.2 million as of
December 29, 2012. As of March 30, 2013, the Company had $3.8 million of available borrowings under its
revolving line of credit compared with $2.5
million as of December 29,
2012. Net working capital of $7.1
million decreased $0.5 million
as of March 30, 2013, compared with
$7.6 million as of December 29, 2012. The decline can be attributed
to an increase in accrued liabilities and the net impact of lower
appliance inventory and a reduced line of credit balance.
Conference Call Information
In conjunction with this release, Appliance Recycling Centers of
America, Inc. will host a conference call tomorrow, May 7, 2013, at 10:00 a.m.
CDT. To participate in the conference call, please dial the
following number ten minutes prior to the scheduled time:
888-221-1887. A replay of the conference call will be available on
the Company's website, www.ARCAInc.com, approximately 24-48 hours
after the completion of the call.
About ARCA
ARCA's three business components are uniquely positioned in
the industry to work together to provide a full array of
appliance-related services. ARCA Advanced Processing, LLC employs
advanced technology to refine traditional appliance recycling
techniques to achieve optimal revenue-generating and environmental
benefits. ARCA is also the exclusive North American distributor for
UNTHA Recycling Technology (URT), one of the world's leading
manufacturers of technologically advanced refrigerator recycling
systems and recycling facilities for electrical household
appliances and electronic scrap. ARCA's regional centers process
appliances at end of life to remove environmentally damaging
substances and produce material byproducts for recycling for over
150 utilities in the U.S. and Canada. Eighteen company-owned stores under
the name ApplianceSmart, Inc.® sell new appliances
directly to consumers and provide affordable ENERGY
STAR® options for energy efficiency appliance
replacement programs.
This press release contains statements that are
forward-looking statements as defined within the Private Securities
Litigation Reform Act of 1995, including statements regarding
ARCA's future success. These forward-looking statements are subject
to risks and uncertainties that could cause actual results to
differ materially from the statements made, including the risks
associated with general economic conditions, competition in the
retail and recycling industries and regulatory risks. Other factors
that could cause operating and financial results to differ are
described in ARCA's periodic reports filed with the Securities and
Exchange Commission. Other risks may be detailed from time to time
in reports to be filed with the SEC.
APPLIANCE RECYCLING CENTERS OF AMERICA,
INC.
|
CONSOLIDATED BALANCE SHEETS
|
(In
Thousands)
|
|
|
March
30,
2013
|
December 29,
2012
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash equivalents
|
$
3,925
|
$
3,174
|
Accounts receivable, net of allowance of $12 and $8,
respectively
|
6,826
|
6,256
|
Inventories, net of reserves of $504 and $682,
respectively
|
14,395
|
17,274
|
Income taxes receivable
|
518
|
522
|
Other current assets
|
1,001
|
1,332
|
Total
current assets
|
26,665
|
28,558
|
Property and equipment, net
|
11,946
|
12,248
|
Restricted cash
|
500
|
-
|
Other assets
|
1,069
|
973
|
Deferred income taxes
|
24
|
25
|
Total
assets (a)
|
$
40,204
|
$
41,804
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts payable
|
$
5,449
|
$
4,957
|
Accrued expenses
|
5,179
|
4,310
|
Line of credit
|
7,769
|
10,559
|
Current maturities of long-term
obligations
|
1,037
|
955
|
Deferred income tax liabilities
|
146
|
146
|
Total
current liabilities
|
19,580
|
20,927
|
|
|
|
Long-term obligations, less current
maturities
|
6,150
|
6,357
|
Deferred gain, net of current portion
|
244
|
365
|
Deferred income tax liabilities
|
921
|
921
|
Total
liabilities (a)
|
26,895
|
28,570
|
|
|
|
Commitments and contingencies
|
-
|
-
|
|
|
|
Shareholders' equity:
|
|
|
Common Stock, no par value; 10,000 shares authorized;
issued and outstanding:
5,556 shares at both periods
|
20,581
|
20,577
|
Accumulated deficit
|
(8,465)
|
(8,649)
|
Accumulated other comprehensive loss
|
(348)
|
(290)
|
Total
shareholders' equity
|
11,768
|
11,638
|
Noncontrolling interest
|
1,541
|
1,596
|
|
13,309
|
13,234
|
Total
liabilities and shareholders' equity
|
$
40,204
|
$
41,804
|
|
(a)
|
Assets of
ARCA Advanced Processing, LLC (AAP), ARCA's consolidated variable
interest entity (VIE), that can only be used to settle obligations
of AAP were $9,762 and $10,045 as of March 30, 2013, and December
29, 2012, respectively. Liabilities of AAP for which creditors do
not have recourse to the general credit of Appliance Recycling
Centers of America, Inc. were $1,922 and $1,948 as of March 30,
2013, and December 29, 2012, respectively.
|
|
|
|
|
|
|
APPLIANCE RECYCLING CENTERS OF AMERICA,
INC.
|
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
|
(In
Thousands, Except Per Share Amounts)
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
March
30,
2013
|
March
31,
2012
|
Revenues:
|
|
|
|
|
|
Retail
|
|
|
|
$
18,059
|
$
19,756
|
Recycling
|
|
|
|
8,300
|
5,265
|
Byproduct
|
|
|
|
4,065
|
4,423
|
Total
revenues
|
|
|
|
30,424
|
29,444
|
|
|
|
|
|
|
Costs of
revenues
|
|
|
|
22,514
|
21,500
|
Gross
profit
|
|
|
|
7,910
|
7,944
|
Selling,
general and administrative expenses
|
|
|
|
7,485
|
7,860
|
Operating
income
|
|
|
|
425
|
84
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
Interest expense, net
|
|
|
|
(283)
|
(254)
|
Other income (expense),
net
|
|
|
|
(13)
|
16
|
Income
(loss) before income taxes and noncontrolling interest
|
|
|
|
129
|
(154)
|
Benefit of
income taxes
|
|
|
|
-
|
(77)
|
Net income
(loss)
|
|
|
|
129
|
(77)
|
Net loss
attributable to noncontrolling interest
|
|
|
|
55
|
11
|
Net income
(loss) attributable to controlling interest
|
|
|
|
$
184
|
$
(66)
|
|
|
|
|
|
|
Income
(loss) per common share:
|
|
|
|
|
|
Basic
|
|
|
|
$
0.03
|
$
(0.01)
|
Diluted
|
|
|
|
$
0.03
|
$
(0.01)
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
Basic
|
|
|
|
5,556
|
5,537
|
Diluted
|
|
|
|
5,678
|
5,537
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
|
|
$
129
|
$
(77)
|
Other
comprehensive income (loss), net of tax:
|
|
|
|
|
|
Effect of foreign currency translation
adjustments
|
|
|
|
(58)
|
60
|
Total
other comprehensive income (loss), net of tax
|
|
|
|
(58)
|
60
|
Comprehensive income (loss)
|
|
|
|
71
|
(17)
|
Comprehensive loss attributable to noncontrolling
interest
|
|
|
|
55
|
11
|
Comprehensive income (loss) attributable to
controlling interest
|
|
|
|
$
126
|
$
(6)
|
|
|
|
|
|
|
SOURCE Appliance Recycling Centers of America, Inc.