MINNEAPOLIS, April 1, 2016 /PRNewswire/ -- Appliance Recycling
Centers of America, Inc. ("ARCA" or the "Company") (NASDAQ: ARCI),
a leading provider of appliance recycling and retailing services,
today announced results for its financial reporting periods ended
January 2, 2016.
Full Year
Total revenues in 2015 were $111.8
million, down 14.6% compared with 2014 revenue of
$130.9 million. The Company reported
a net loss in 2015 of $2.7 million,
or $(0.47) per diluted share. This
compares with a net income in 2014 of $0.8
million, or $0.13 per diluted
share.
Fourth Quarter
Revenues for the fourth quarter of 2015 were $26.0 million, which is $5.8 million or 18.1% less than the same period
in 2014. The decrease was due mainly to lower byproduct
revenues from the commodities that we sell, lower volumes from
energy efficiency programs with utility customers and there being
one more week in fiscal 2014 fourth quarter as compared with fiscal
2015 fourth quarter.
For the quarter, the Company reported a loss before taxes and
non-controlling interests of $2.1
million, compared with a loss of $0.9
million during the same period of the prior year. The net
after-tax loss for the fourth quarter of 2015 was $0.8 million, or $(0.14) per diluted share, compared with net
after-tax loss of $0.6 million, or
$(0.11) per diluted share, reported
during the same period in the prior year.
Retail Appliance Sales
ApplianceSmart, the Company's retail division, posted sales of
$14.8 million for the fourth quarter,
a decrease of $1.4 million, or 9.0%,
compared with the same period of 2014. The decrease was due mainly
to an extra week in the fourth quarter of fiscal 2014 compared with
fiscal 2015. ApplianceSmart reported an operating loss of
$1.0 million for the fourth quarter
of 2015, compared with an operating loss of $0.9 million in the same period of the prior
year. The increase in the loss was primarily due to expenses
related to a sublease that we entered into to reduce store
occupancy costs over the remaining term of our lease.
Recycling Revenues
Recycling revenues, which consist of appliance recycling fees
and appliance replacement revenues generated through the Company's
recycling division, ARCA Recycling, Inc., were $9.2 million in the fourth quarter of 2015 a
decrease of $2.0 million or 18.5%,
compared to the same period of 2014. Appliance replacement revenues
decreased $1.8 million, while
appliance recycling fees decreased $0.2
million. The decline from the prior year fourth quarter
results can be attributed to lower volumes on certain utility
energy efficiency programs and the discontinuance of a couple of
our replacement programs.
Byproduct Revenues
The Company's byproduct revenues, which also include revenue
from AAP operations, were $2.1
million in the fourth quarter of 2015, a decrease of
$2.2 million, or 52% compared with
the fourth quarter of 2014. The decline in byproduct revenues
was the result of decreased scrap steel and nonferrous metal
pricing. The decline in metal prices that began in May 2014 continued throughout the end of
January 2016. Lower pricing is
being driven by weak demand in steel intensive industries like oil
and gas production, a stronger dollar, and over-production of iron
ore and steel around the world.
ARCA's declines in byproduct revenues include decreases of
$0.8 million in commodities sold.
Revenues from the ARCA Advanced Processing, LLC ("AAP") joint
venture in Philadelphia also
reported a $1.4 million decline in
commodity revenues to $1.4 million,
compared with $2.8 million in the
fourth quarter of 2014. The decline was due primarily to decreased
scrap steel and nonferrous metal revenues for the same reasons
noted above. The low prices in the commodities that we sell
continue to unfavorably impact our business. The pricing of
these commodities are subject to many macroeconomic factors out of
our control. Historically, decreases in the prices can
be abrupt followed by a slow recovery. We are seeing signs of
recovery in many of the commodities that we sell in March 2016 from the lows experienced in October
2015.
Liquidity and Capital Resources
Cash and cash equivalents were $2.0
million as of January 2, 2016,
compared with $3.5 million as of
January 3, 2015. As of January 2, 2016, the Company had excess available
borrowing capacity under its revolving line of credit of
$1.4 million. Net working capital
decreased $5.1 million to
$4.5 million as of January 2, 2016. In January 2016, the Company renewed its
$15.0 million credit facility with
the Bank.
Commentary
Commenting on the Company's strategic and operational progress,
Tony Isaac, ARCA's Interim Chief
Executive Officer, said, "Coming off an exceptionally challenging
year for the Company I am looking forward to the challenge of
returning ARCA to profitable operating results. We have
several significant impediments behind and opportunities ahead in
2016 as follows:
- Challenges in 2015.
- The most significant impact on our 2015 operating results was
the decline in the commodity prices of byproducts that we
sell. We have been working with our customers and suppliers
to improve pricing on many of our programs and contractual
relationships. Our industry experienced a considerable
challenge as a result of the nature of the contracts with customers
and the reliance on byproduct revenue, as evidenced by our largest
competitor Jaco Environmental, Inc. entering into receivership in
November 2015.
- We incurred substantial legal expense in 2015 that resulted
from litigation that we do not expect to experience in 2016.
- We further incurred expenses to relocate our corporate
headquarters and to rationalize the size of a number of our retail
stores to reduce the operating costs of our business. The
expenses incurred will not be recurring and the benefit of reduced
occupancy costs should be realized in the years to come.
- We also experienced losses related to the decline of the
Canadian dollar relative to the U.S. dollar that we have taken
steps to avoid in 2016.
- Utility Program Business Development. We have entered into a
number of new contracts already in 2016 and anticipate that we will
experience an increase in appliance recycling revenues as a
result. We are taking steps to model our business to reduce
our reliance on the pricing of the commodities that we sell.
We provide an exceptional level of service to our customers and are
very well positioned to continue to expand our current and future
offerings to the utility industry.
- Carbon Offset Revenues. We recently received notification of
the issuance of offset credits under the California Cap and Trade
compliance program from the Climate Action Reserve which will
result in approximately $1.7 million
in revenue the first quarter of 2016. This compares with
$0.8 million in carbon offset
revenues that we earned in all of 2015. We are also
processing another destruction project in 2016 that we anticipate
will result in further revenue from carbon offset credits before
the end of 2016 in the amount of $0.9
million."
Commenting on the business, Mr. Isaac continued, "We are excited
about the opportunities that lie ahead and look forward to the
results of the efforts that we have undertaken to expand our
business and to reduce our operating expenses."
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 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.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
Thousands)
|
|
|
January 2,
2016
|
January 3,
2015
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
|
1,969
|
|
$
|
3,523
|
|
Accounts
receivable
|
11,536
|
|
10,954
|
|
Inventories
|
16,733
|
|
16,113
|
|
Income taxes
receivable
|
1,126
|
|
709
|
|
Other current
assets
|
1,350
|
|
1,096
|
|
Deferred tax
assets
|
1,657
|
|
2,082
|
|
Total current
assets
|
34,371
|
|
34,477
|
|
Property and
equipment, net
|
10,985
|
|
11,761
|
|
Restricted
cash
|
500
|
|
-
|
|
Other
assets
|
990
|
|
722
|
|
Total assets
(a)
|
$
|
46,846
|
|
$
|
46,960
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
|
7,019
|
|
$
|
6,380
|
|
Accrued
expenses
|
8,934
|
|
8,133
|
|
Line of
credit
|
12,668
|
|
9,237
|
|
Current maturities of
long-term obligations
|
1,251
|
|
1,138
|
|
Total current
liabilities
|
29,872
|
|
24,888
|
|
Long-term
obligations, less current maturities
|
4,573
|
|
5,118
|
|
Other noncurrent
liabilities
|
357
|
|
369
|
|
Deferred income tax
liabilities
|
-
|
|
1,048
|
|
Total liabilities
(a)
|
34,802
|
|
31,423
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
Total shareholders'
equity
|
11,324
|
|
13,602
|
|
Noncontrolling
interest
|
720
|
|
1,935
|
|
|
12,044
|
|
15,537
|
|
Total liabilities and
shareholders' equity
|
$ 46,846
|
|
$ 46,960
|
|
(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 $8,915 and $9,814 as
of January 2, 2016 and January 3, 2015, respectively.
Liabilities of AAP, for which creditors do not have recourse to the
general credit of Appliance Recycling Centers of America, Inc.,
were $2,838 and $2,338 as of January 2, 2016 and January 3, 2015,
respectively.
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In Thousands,
Except Per Share Amounts)
|
|
|
Three Months
Ended
|
|
Fiscal Years
Ended
|
|
January
2,
2016
|
January
3,
2015
|
|
January
2,
2016
|
January
3,
2015
|
Revenues:
|
|
|
|
|
|
Retail
|
$
|
14,792
|
|
$
|
16,249
|
|
|
$
|
65,637
|
|
$
|
67,023
|
|
Recycling
|
9,161
|
|
11,236
|
|
|
35,878
|
|
45,914
|
|
Byproduct
|
2,055
|
|
4,277
|
|
|
10,324
|
|
17,993
|
|
Total
revenues
|
26,008
|
|
31,762
|
|
|
111,839
|
|
130,930
|
|
|
|
|
|
|
|
Costs of
revenues
|
20,527
|
|
24,429
|
|
|
86,391
|
|
98,120
|
|
Gross
profit
|
5,496
|
|
7,333
|
|
|
25,448
|
|
32,810
|
|
Selling, general and
administrative expenses
|
7,099
|
|
7,976
|
|
|
29,552
|
|
30,259
|
|
Operating income
(loss)
|
(1,618)
|
|
(643)
|
|
|
(4,104)
|
|
2,551
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest expense, net
|
(414)
|
|
(288)
|
|
|
(1,292)
|
|
(996)
|
|
Other income (expense),
net
|
(75)
|
|
9
|
|
|
(250)
|
|
(46)
|
|
Income (loss) before
income taxes and noncontrolling interest
|
(2,107)
|
|
(922)
|
|
|
(5,646)
|
|
1,509
|
|
Provision for
(benefit of) income taxes
|
(820)
|
|
(262)
|
|
|
(1,714)
|
|
714
|
|
Net income
(loss)
|
(1,287)
|
|
(660)
|
|
|
(3,932)
|
|
795
|
|
Net loss (income)
attributable to noncontrolling interest
|
441
|
|
54
|
|
|
1,215
|
|
(24)
|
|
Net income (loss)
attributable to controlling interest
|
$
|
(846)
|
|
$
|
(606)
|
|
|
$
|
(2,717)
|
|
$
|
771
|
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
|
(0.14)
|
|
$
|
(0.10)
|
|
|
$
|
(0.47)
|
|
$
|
0.14
|
|
Diluted
|
$
|
(0.14)
|
|
$
|
(0.10)
|
|
|
$
|
(0.47)
|
|
$
|
0.13
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,901
|
|
5,788
|
|
|
5,833
|
|
5,676
|
|
Diluted
|
5,901
|
|
5,788
|
|
|
5,833
|
|
5,780
|
|
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SOURCE Appliance Recycling Centers of America, Inc.