MINNEAPOLIS, Feb. 27, 2013 /PRNewswire/ -- Appliance
Recycling Centers of America, Inc. (NASDAQ: ARCI), a leading
provider of appliance retailing and recycling services, today
reported sales and operating results for the fourth quarter and
year ended December 29, 2012.
Total revenues decreased 5% to $26.6
million versus $28.0 million
for the fourth quarter of 2011. Overall, the Company reported a
consolidated net loss of $2.1
million, or ($0.37) per
diluted share, compared with breakeven results in the fourth
quarter of 2011. During the fourth quarter, the Company's joint
venture, ARCA Advanced Processing, LLC (AAP) recorded a non-cash
goodwill impairment charge of $1.1
million. The Company's share of the goodwill impairment
charge included in the consolidated net loss was $541,000 or ($0.10)
per diluted share.
The Company is pleased to report that it has agreed in principle
with PNC Bank, National Association (PNC) to a modification of its
credit agreement that extends the credit agreement two years and
waives the default caused by being out of compliance with two
financial covenants. The modification to the credit agreement has
been submitted for approval by PNC. The modified terms do not
impact the total amount of available borrowing, include a resetting
of the financial covenants and require a minimum EBITDA through
2013. The Company expects the agreement to be completed by
mid-March.
"We appreciate PNC Bank's confidence in our business and we're
very pleased to reach this important agreement, including extending
our $15 million line of credit," said
Edward R. (Jack) Cameron, president
and chief executive officer of ARCA, Inc. "Their supportive
partnership better enables us to meet our strategic objectives and
capitalize on future growth opportunities."
Although retail store sales rebounded modestly in October, total
retail store sales for the fourth quarter of 2012 declined 10%
compared with the same period of 2011. Consumer anxiety about the
election, economy and government spending cuts dampened demand. For
fiscal 2012, total retail store revenues decreased 2.1% to
$71.2 million. By comparison,
industry shipments of the six primary appliances sold at
ApplianceSmart decreased 2.3% for fiscal 2012 according to the
Association of Home Appliance Manufacturers. For fiscal 2012, the
Company's retail stores generated an operating loss before
corporate overhead of $0.7 million, a
$2.4 million decline compared with
fiscal 2011. During the fourth quarter of 2012, the Company
recorded a $0.5 million non-cash
inventory charge related to aged inventory. Also during the fourth
quarter of 2012, the Company closed two underperforming stores in
Georgia that resulted in a
non-cash lease termination charge of $0.2
million. The Company is implementing strategies for
addressing underperforming stores, from right-sizing showroom space
to closure. The Company plans to close another one or two
underperforming stores in 2013.
Recycling revenues, which are comprised of appliance recycling
fees and appliance replacement program revenues, increased to
$6.8 million in the fourth quarter of
2012 from $6.4 million in the same
period of 2011. Replacement program revenues increased $1.8 million while appliance recycling fees
declined $1.4 million. The Company
reported a 36% increase in replacement units and a 25% decline in
overall recycling volumes. The increase in replacement program
revenues was partially offset by lower appliance recycling
revenues, resulting in a $0.4 million
improvement in operating profit. In January the Company announced
recycling contract extensions into 2015 with two utilities –
Southern California Edison and Ameren Missouri.
Byproduct revenues, excluding AAP and carbon offset sales,
decreased to $1.6 million compared
with $1.9 million in the fourth
quarter of 2011. The decrease was a direct result of the 25%
reduction in overall recycling volumes cited earlier coupled with a
16% decrease in scrap metal prices compared with the fourth quarter
of 2011. During the fourth quarter of 2011, the Company, including
AAP, recognized $0.4 million in
carbon offset revenues by electing to destroy CFC refrigerants.
Despite ferrous scrap metal prices falling as much as 26% during
the quarter, AAP revenues declined only 7% to $2.9 million compared with the fourth quarter of
2011. AAP's operating loss for the fourth quarter of 2012,
excluding the impact of the $1.1
million goodwill impairment charge, was $49,000 due primarily to lower ferrous scrap
metal prices along with the accumulation of CFCs
(chlorofluorocarbons) to be sold in the future.
By operating the only UNTHA Recycling Technology (URT) System in
the United States, AAP is uniquely
positioned for large-volume refrigerator recycling including the
capture of ozone-depleting CFCs contained in the foam insulation.
Since 2011, AAP's URT system in Philadelphia has recycled over 150,000
refrigerators and freezers.
AAP and ARCA were pleased with the California Superior Court
decision on January 25, 2013,
rejecting a challenge to California's cap and trade program for
reducing greenhouse gases. Several other suits are pending, but the
Environmental Defense Fund hailed this ruling as "a bright green
light…for further investment" in pollution-reduction projects
inside and outside California.
Last week, California's second
auction of carbon-emissions allowances took place; prices rose 36%
since the November 2012 auction. The
ongoing accumulation of CFCs at both ARCA and AAP is significant;
both companies expect to create carbon offsets through the
destruction of CFCs throughout 2013 and derive revenues in the
second half of 2013.
"The court's decision removes a significant roadblock to
California's carbon offset market
and indicates how momentum is growing regionally and globally for
these markets," Cameron noted. The value of the North American
carbon market is expected to more than double during 2013 to
$2.5 billion, according to Thomson
Reuters Point Carbon. Bloomberg New Energy Finance states that
trading activity in the world's carbon markets has increased 25%
annually since 2010.
"Our unique ability to capture CFCs from insulating foam
benefits the environment by reducing greenhouse gas emissions and
landfill waste, while also generating revenue for us. It's a
win-win all around," said Brian
Conners, president and chief operating officer of AAP.
Overall gross profit as a percentage of total revenues declined
to 23% for the fourth quarter of 2012 compared with 29% during the
same period of 2011. The decline in overall gross profit percentage
was primarily the result of lower byproduct and carbon offset
revenues along with the non-cash inventory charge cited
earlier.
"After a challenging quarter and fiscal year, we have taken
decisive steps to improve ARCA's operational execution and
profitability in 2013," said Cameron. "Our strategic initiatives
span all aspects of our business, including our retail stores,
regional recycling centers, corporate office and AAP joint venture.
We will be even more nimble this year, better able to capitalize on
new opportunities and weather adversity. Our outlook remains
positive, bolstered by confidence in the long-term synergies across
our business units and some early signs of economic recovery
indicated by the housing market."
Last year ended with construction activity and home prices both
rising, according to the National Association of Home Builders
(NAHB); the latest NAHB confidence index is also near its highest
level since May 2006. The Company
expects the ripple effects of increased housing market activity to
benefit appliance sales and related recycling volumes. During 2012,
building permits for single-family homes rose 24%; multi-family
housing permits climbed 53%.
"In recent months our retail operations have seen a significant
increase in bid requests for multi-family housing projects,
although these potential contracts take time to reach fruition,"
Cameron noted. "We started this year with an improved inventory mix
– more out-of-carton appliances and a strong product portfolio to
suit a wide range of tastes and budgets."
For the year ended December 29,
2012, total revenues decreased 10% to $114.3 million, compared with revenues of
$126.7 million for the 2011 fiscal
year. Overall, the Company reported a consolidated net loss of
$3.9 million, or ($0.69) per diluted share, compared with a
consolidated net income of $4.5
million, or $0.77 per diluted
share, for the year ended December 31,
2011.
Liquidity and Capital Resources
Cash and cash equivalents as of December
29, 2012, were $3.2 million
compared with $4.4 million as of
December 31, 2011. As of December 29, 2012, the Company had $2.5 million of available borrowings under its
revolving line of credit compared with $3.5
million as of December 31,
2011. Based on the agreement in principle with PNC for
modification of the Company's credit agreement, $1.8 million of borrowings have been classified
as long-term obligations as of December 29,
2012. Net working capital of $7.6
million decreased $3.8 million
as of December 29, 2012, compared
with $11.4 million as of December 31, 2011. The decline was primarily the
result of carrying $1.2 million less
in cash, $1.3 million less appliance
inventory and $1.2 million in lower
receivables.
Conference Call Information
In conjunction with this release, Appliance Recycling Centers of
America, Inc. will host a conference call tomorrow, February 28, 2013, at 10:00 a.m. CST. To participate in the conference
call, please dial the following number ten minutes prior to the
scheduled time: 1-800-671-7004. 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
200 utilities in the U.S. and Canada. Nineteen 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)
|
|
|
December 29,
2012
|
December 31,
2011
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash equivalents
|
$
3,174
|
$
4,401
|
Accounts receivable, net of allowance of $8 and $18,
respectively
|
6,256
|
7,445
|
Inventories, net of reserves of $682 and $85,
respectively
|
17,274
|
18,456
|
Income taxes receivable
|
522
|
392
|
Other current assets
|
1,332
|
1,028
|
Deferred income tax assets
|
-
|
173
|
Total
current assets
|
28,558
|
31,895
|
Property and equipment, net
|
12,248
|
12,535
|
Goodwill
|
38
|
1,120
|
Other assets
|
935
|
1,232
|
Deferred income taxes assets
|
25
|
27
|
Total
assets (a)
|
$
41,804
|
$
46,809
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts payable
|
$
4,957
|
$
4,323
|
Accrued expenses
|
4,310
|
4,453
|
Line of credit
|
10,559
|
10,685
|
Current maturities of long-term obligations
(b)
|
955
|
989
|
Deferred income tax liabilities
|
146
|
-
|
Total
current liabilities
|
20,927
|
20,450
|
|
|
|
Long-term obligations, less current maturities
(b)
|
6,357
|
7,251
|
Deferred gain, net of current portion
|
365
|
853
|
Deferred income tax liabilities
|
921
|
875
|
Total
liabilities (a)
|
28,570
|
29,429
|
|
|
|
Commitments and contingencies
|
-
|
-
|
|
|
|
Shareholders' equity:
|
|
|
Common Stock, no par value; 10,000 shares authorized;
issued and outstanding: 5,556 shares and 5,527 shares,
respectively
|
20,577
|
20,338
|
Accumulated deficit
|
(8,649)
|
(4,797)
|
Accumulated other comprehensive loss
|
(290)
|
(361)
|
Total
shareholders' equity
|
11,638
|
15,180
|
Noncontrolling interest
|
1,596
|
2,200
|
|
13,234
|
17,380
|
Total
liabilities and shareholders' equity
|
$
41,804
|
$
46,809
|
|
|
|
(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 $10,045 and $11,771 as of December 29, 2012, and
December 31, 2011, respectively. Liabilities of AAP for which
creditors do not have recourse to the general credit of Appliance
Recycling Centers of America, Inc. were $1,948 and $2,186 as of
December 29, 2012, and December 31, 2011, respectively.
|
(b)
|
Based on
the agreement in principle with PNC Bank, National Association
(PNC) for modification of the Company's credit agreement, $1,785 of
borrowings have been classified as long-term obligations as of
December 29, 2012.
|
|
|
APPLIANCE RECYCLING CENTERS OF AMERICA,
INC.
|
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
|
(In
Thousands, Except Per Share Amounts)
|
|
|
Three
Months Ended
|
|
Year
Ended
|
|
December 29,
2012
|
December 31,
2011
|
|
December 29,
2012
|
December 31,
2011
|
Revenues:
|
|
|
|
|
|
Retail
|
$
15,228
|
$
16,424
|
|
$
71,234
|
$
72,773
|
Recycling
|
6,845
|
6,362
|
|
25,280
|
33,062
|
Byproduct
|
4,490
|
5,209
|
|
17,799
|
20,834
|
Total
revenues
|
26,563
|
27,995
|
|
114,313
|
126,669
|
|
|
|
|
|
|
Costs of
revenues
|
20,514
|
19,987
|
|
86,358
|
89,934
|
Gross
profit
|
6,049
|
8,008
|
|
27,955
|
36,735
|
Selling,
general and administrative expenses
|
7,346
|
7,473
|
|
30,095
|
29,491
|
Impairment
charge
|
1,082
|
-
|
|
1,082
|
-
|
Operating
income (loss)
|
(2,379)
|
535
|
|
(3,222)
|
7,244
|
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
|
Interest expense, net
|
(307)
|
(253)
|
|
(1,139)
|
(1,133)
|
Other income (expense), net
|
10
|
(4)
|
|
(12)
|
(22)
|
Income
(loss) before income taxes and noncontrolling interest
|
(2,676)
|
278
|
|
(4,373)
|
6,089
|
Provision
for (benefit of) income taxes
|
(7)
|
75
|
|
83
|
1,367
|
Net income
(loss)
|
(2,669)
|
203
|
|
(4,456)
|
4,722
|
Net loss
(income) attributable to noncontrolling interest
|
606
|
(200)
|
|
604
|
(261)
|
Net income
(loss) attributable to controlling interest
|
$
(2,063)
|
$
3
|
|
$
(3,852)
|
$
4,461
|
|
|
|
|
|
|
Income
(loss) per common share:
|
|
|
|
|
|
Basic
|
$
(0.37)
|
$
-
|
|
$
(0.69)
|
$
0.81
|
Diluted
|
$
(0.37)
|
$
-
|
|
$
(0.69)
|
$
0.77
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
Basic
|
5,556
|
5,510
|
|
5,551
|
5,493
|
Diluted
|
5,556
|
5,876
|
|
5,551
|
5,809
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(2,669)
|
$
203
|
|
$
(4,456)
|
$
4,722
|
Other
comprehensive income (loss), net of tax:
|
|
|
|
|
|
Effect of foreign currency translation
adjustments
|
(38)
|
53
|
|
71
|
(87)
|
Total
other comprehensive income (loss), net of tax
|
(38)
|
53
|
|
71
|
(87)
|
Comprehensive income (loss)
|
(2,707)
|
256
|
|
(4,385)
|
4,635
|
Comprehensive loss (income) attributable to
noncontrolling interest
|
606
|
(200)
|
|
604
|
(261)
|
Comprehensive income (loss) attributable to
controlling interest
|
$
(2,101)
|
$
56
|
|
$
(3,781)
|
$
4,374
|
|
|
|
|
|
|
SOURCE Appliance Recycling Centers of America, Inc.