MINNEAPOLIS, March 30, 2015 /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 3,
2015. Key highlights are as follows:
- 2014 sales were at a record level.
- The Company recorded profitable results in 2014.
- At year end, the Company's:
- Cash on hand was $3.5
million.
- Bank line of credit excess availability was $4.9 million.
- Working capital was $10.3
million.
- Net book value was $16.2
million.
- The Company is making strategic and operational progress.
- Scrap prices have been in decline.
- The carbon offset market has freed up; $450,000 to $650,000 for carbon offsets expected
by late April.
- Section 111(d) of the Clean Air Act represents significant
opportunity for ARCA.
ARCA's financial results shown in the attached table and in the
Company's Form 10-K, which was filed with the Securities and
Exchange Commission today, reflect adjustment in all applicable
reporting periods for the previously communicated California sales tax accrual. Discussion
regarding the Company's financial results follows:
Full Year
For the year, the Company reported profitable results on record
sales. Total revenues in 2014 were $130.9
million, up 2.3% compared with 2013 revenue of $127.9 million. The Company's reported net income
in 2014 was $0.8 million, or
$0.13 per diluted share. This
compares with net income in 2013 of $3.1
million, or $0.55 per diluted
share, which included the impact of a deferred tax asset valuation
allowance adjustment that added $2.2
million, or $0.37 per diluted
share, to 2013 net income.
Fourth Quarter
Revenues for the fourth quarter of 2014 were $31.8 million, which is $0.8 million or 2.4% less than the same period in
2013 due mainly to the receipt of $0.7
million in carbon offsets in the fourth quarter of 2013; no
carbon offsets were received in the fourth quarter of 2014. The
fourth quarter of 2014 was also impacted by lower byproduct
revenues due to a decline in scrap prices.
For the quarter, the Company reported a loss before taxes and
non-controlling interests of $0.9
million, compared with income of $0.5
million during the same period of the prior year. The net
after-tax loss for the fourth quarter of 2014 was $0.6 million, or $0.10 per diluted share, compared with net
after-tax income of $2.0 million, or
$0.34 per diluted share, reported
during the same period in the prior year. This variance was caused
by the deferred tax asset valuation allowance adjustment mentioned
above, timing of carbon offset income, scrap price erosion, and the
impact of promotional retail pricing in our ApplianceSmart
division.
Retail Appliance Sales
ApplianceSmart, the Company's retail division, posted sales of
$16.2 million for the fourth quarter,
an increase of $0.6 million, or 3.6%,
compared with the same period of 2013. The increase was due mainly
to an extra week in the fourth quarter of fiscal 2014 compared with
fiscal 2013. ApplianceSmart reported an operating loss of
$1.2 million for the fourth quarter
of 2014, compared with an operating loss of $0.8 million in the same period of the prior
year. This was due to aggressive pricing in 2014 especially for
extended Black Friday promotions in November.
Recycling Revenues
Recycling revenues, which consist of appliance recycling fees
and appliance replacement revenues generated through the Company's
recycling division, ARCA Recycling, Inc., decreased $0.3 million, or 2.4%, to $11.2 million in the fourth quarter of 2014.
Appliance replacement revenues decreased $0.6 million, while appliance recycling fees
increased $0.3 million. Although
sales of appliance replacement units in the fourth quarter of 2014
were significant, the Company did not experience the same volume as
in the prior year when one utility accelerated appliance
installations into its 2013 program year.
Byproduct Revenues
The Company's byproduct revenues, which also include revenue
from AAP operations, decreased $1.0
million to $4.3 million,
compared with the fourth quarter of 2013. The Company recognized
$0.7 million in revenues from the
sale of carbon offsets during the fourth quarter of 2013 with no
corresponding carbon offset revenue in the fourth quarter of 2014.
Overall recycling volumes increased during the fourth quarter of
2014 but revenues were impacted by declines in the selling price of
scrap steel, non-ferrous metals and plastics when compared with the
fourth quarter of 2013.
Commentary
Commenting on the Company's strategic and operational progress,
Mark Eisenschenk, ARCA's President
and Chief Executive Officer, said, "Since I've been in my role as
CEO, our team has achieved significant strategic and operational
accomplishments, some of which are as follows:
- Strategic Planning. With help from a professional strategic
planning facilitator, 'thought leaders' in the Company developed a
comprehensive working strategic plan for our business. This plan
outlines critical initiatives that include: (1) immediately
reducing operating costs, (2) growing sales in all areas of our
business, (3) pursuing external business development, and (4)
capitalizing on opportunities available through our country's
pending implementation of Section 111(d) of the Clean Air Act.
- Organizational Realignment. We functionally restructured our
organization. Todd Lein, who has
extensive appliance operations experience, was promoted to Vice
President of Operations and is now responsible for all aspects of
our retail and recycling operations. Rachel
Holmes, Vice President of Business Development, in addition
to her responsibility for organic sales growth, assumed expanded
responsibility for marketing. Jeffery
Ostapeic joined ARCA as Chief Financial Officer. Jeff
brought to ARCA a new level of financial acumen, having previously
served as an audit partner for the national certified public
accounting firms of Grant Thornton LLP and McGladrey Pullen
LLP.
- Space Reduction. We simply have too much space. And too much
space means too much cost. That said, we've already reduced and are
continuing to reduce retail stores to roughly a 20,000-square-feet
footprint. We relocated and continue to relocate operations
functions to other existing facilities. And we are in the process
of downsizing our corporate office.
- Sales Training. We implemented a program to improve retail
customer experiences. More than 100 ApplianceSmart sales
associates, managers and leaders of our appliance delivery teams
have been trained in how to better care for retail guests. We
believe great customer experiences can lead to increased financial
results for the Company.
- Admittance into the California Managed Audit Program. While our
ultimate obligation for utility program-related sales taxes is up
for debate, the fact that we were admitted into the Managed Audit
Program is significant. The Company has estimated and accrued
$3.9 million ($2.4 million net of tax) for the California sales tax, which is in line with
what was mentioned in previous communication. Admission into the
Managed Audit Program should help us better manage our exposure
relative to this controversial issue.
- Patent on Our Refrigerant Recovery System. Refrigerant recovery
is a key part of our business. Our state-of-the- art refrigerant
recovery and management system now has U.S. patent protection. This
patent should make it more difficult for others to attempt to do
what we do.
- RIOS Certification. 'RIOS' stands for Recycling Industry
Operating Standards. RIOS is the gold standard of excellence in the
recycling industry. It encompasses ISO 9001 quality standards, ISO
14001 environmental standards and OHSAS 18001 health and safety
standards. Last month our AAP joint venture received RIOS
certification at its operation in Philadelphia. We're pleased to say no other
appliance recycling company in the United
States has been awarded this highly regarded
certification."
Commenting on the business, Mr. Eisenschenk continued, "The
decline in scrap prices that affected ARCA in the fourth quarter of
2014 continued into 2015. The United
States has experienced across-the-board declines in
virtually all commodity prices, from grain to oil to lumber to
metals. These declines are due in large part to the strength of the
U.S. dollar, which makes it expensive for countries such as
China and Turkey to purchase scrap metal from suppliers
located in the United States.
Consequently, foreign buyers have shifted their purchases from the
U.S. to European countries and elsewhere. At the same time, U.S.
steel mills have been finding it more advantageous to import
high-quality billets of steel made from virgin iron ore than to
purchase U.S.-generated scrap. As a result, in the near term,
ARCA's scrap revenues per ton have declined further in 2015.
It is unclear when scrap prices will recover and what the
impact will be on our byproduct revenues. On another note, the
carbon offset markets that had been frozen a large part of 2014
have freed up. We expect to receive $450,000
to $650,000 for carbon offsets by late April."
Mr. Eisenschenk concluded by saying, "We're continuing to
implement initiatives set out in our working strategic plan.
Important activities include, among other things, conducting a
national search for a high-level appliance replacement and
recycling sales leader; that search is underway. Also, and this is
important, I believe ARCA will be a beneficiary of Section 111(d)
of the Clean Air Act, which mandates reductions in greenhouse gas
emissions on a national basis . ARCA's business model includes
eliminating energy-guzzling refrigerators and other inefficient
appliances from the grid; this is specifically addressed by
Building Block 4 of Section 111(d) of the Act. Effects of this
mandate could positively and substantially transform our business.
We're determined to capitalize on this significant
opportunity."
About ARCA
ARCA's 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 twelve 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 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
3,
2015
|
December
28,
2013
|
ASSETS
|
|
(as
restated)
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
3,523
|
$
1,948
|
Accounts
receivable
|
10,954
|
12,278
|
Inventories
|
16,113
|
16,654
|
Income taxes
receivable
|
709
|
82
|
Other current
assets
|
1,096
|
622
|
Deferred tax
assets
|
1,868
|
1,593
|
Total current
assets
|
34,263
|
33,177
|
Property and
equipment, net
|
11,761
|
11,424
|
Restricted
cash
|
-
|
500
|
Other
assets
|
722
|
948
|
Total
assets
|
$
46,746
|
$
46,049
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
6,380
|
$
5,880
|
Accrued
expenses
|
7,218
|
6,971
|
Line of
credit
|
9,237
|
9,661
|
Current maturities of
long-term obligations
|
1,138
|
1,131
|
Total current
liabilities
|
23,973
|
23,643
|
|
|
|
Long-term obligations,
less current maturities
|
5,118
|
5,447
|
Other noncurrent
liabilities
|
369
|
518
|
Deferred income tax
liabilities
|
1,048
|
1,092
|
Total
liabilities
|
30,508
|
30,700
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
Common
Stock
|
21,137
|
20,846
|
Accumulated
deficit
|
(6,173)
|
(6,944)
|
Accumulated other
comprehensive loss
|
(661)
|
(464)
|
Total shareholders'
equity
|
14,303
|
13,438
|
Noncontrolling
interest
|
1,935
|
1,911
|
|
16,238
|
15,349
|
Total liabilities and
shareholders' equity
|
$
46,746
|
$
46,049
|
|
|
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In Thousands,
Except Per Share Amounts)
|
|
|
Three Months
Ended
|
|
Fiscal Year
Ended
|
|
January
3,
2015
|
December
28,
2013
|
|
January
3,
2015
|
December
28,
2013
|
|
(unaudited)
|
(as
restated)
|
|
|
(as
restated)
|
Revenues:
|
|
|
|
|
|
Retail
|
$
16,249
|
$
15,678
|
|
$
67,023
|
$
68,556
|
Recycling
|
11,236
|
11,518
|
|
45,914
|
41,002
|
Byproduct
|
4,277
|
5,346
|
|
17,993
|
18,320
|
Total
revenues
|
31,762
|
32,542
|
|
130,930
|
127,878
|
|
|
|
|
|
|
Costs of
revenues
|
24,429
|
24,450
|
|
98,120
|
95,187
|
Gross
profit
|
7,333
|
8,092
|
|
32,810
|
32,691
|
Selling, general and
administrative expenses
|
7,976
|
7,224
|
|
30,259
|
29,295
|
Operating income
(loss)
|
(643)
|
868
|
|
2,551
|
3,396
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest
expense, net
|
(288)
|
(287)
|
|
(996)
|
(1,252)
|
Other
income (expense), net
|
9
|
(77)
|
|
(46)
|
(90)
|
Income (loss) before
income taxes and noncontrolling interest
|
(922)
|
504
|
|
1,509
|
2,054
|
Provision for
(benefit of) income taxes
|
(262)
|
(1,780)
|
|
714
|
(1,408)
|
Net income
(loss)
|
(660)
|
2,284
|
|
795
|
3,462
|
Net (income) loss
attributable to noncontrolling interest
|
54
|
(284)
|
|
(24)
|
(315)
|
Net income (loss)
attributable to controlling interest
|
$
(606)
|
$
2,000
|
|
$
771
|
$
3,147
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
(0.10)
|
$
0.36
|
|
$
0.14
|
$
0.57
|
Diluted
|
$
(0.10)
|
$
0.34
|
|
$
0.13
|
$
0.55
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,788
|
5,571
|
|
5,676
|
5,562
|
Diluted
|
5,788
|
5,847
|
|
5,780
|
5,742
|
|
|
|
|
|
|
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SOURCE Appliance Recycling Centers of America, Inc.