MINNEAPOLIS, Aug. 12, 2015 /PRNewswire/
-- Appliance Recycling Centers of America, Inc.
(NASDAQ: ARCI), a leading provider of appliance recycling and
retailing services, today reported profitable operating results for
the second quarter ended July 4,
2015.
Revenues for the second quarter of 2015 were $30.2 million, down 8.1% compared with the same
period in 2014, as a result of decreased recycling division program
sales and lower byproduct revenues. Net income for the second
quarter of 2015 was $0.6 million, or
$0.10 per diluted share, compared
with earnings of $0.4 million, or
$0.06 per diluted share, reported in
the second quarter of last year, due mainly to the timing of
$0.6 million in carbon offset
revenues in the second quarter of 2015 as compared with no carbon
offset revenues in the second quarter of 2014. The quarter
results continued to be impacted by customer driven delays in
deliveries under one of ARCA's largest appliance energy efficiency
programs and lower byproduct revenues that have resulted from the
significant drop in steel and other nonferrous metal prices in the
markets in which the company operates.
For the six months ended July 4,
2015, total revenues decreased 12.5% to $57.7 million, compared with revenues of
$65.9 million for the same period in
the prior year. Overall, the company reported a net loss for the
six months ended July 4, 2015, of
$(1.1) million, or $(0.19) per diluted share, compared with net
income of $1.1 million, or
$0.18 per diluted share, for the same
period in the prior year.
Second Quarter Highlights
During the second quarter of 2015, the company experienced:
- Decreases in energy efficiency program revenues from utilities,
municipalities and others by $1.8
million.
- Declines in byproduct revenues of $1.5
million as a result of the significant drop in the price of
scrap steel and other nonferrous metals, offset by an increase of
$0.6 million of carbon offset
revenues.
"We continue to report declines in our financial results for the
second quarter as result of delays outside of our control in
appliance recycling programs in fiscal 2015 and the impact the
strong U.S. dollar has had on the price of commodities we sell,"
commented Edward R. (Jack) Cameron,
president and chief executive officer of ARCA, Inc. Cameron
commented further, "Although the recovery of scrap steel and
nonferrous metal prices appears to be slow, we are hopeful the
markets will return to levels at which we are profitable.
Further, the delays encountered in our largest energy efficiency
program have been resolved and we are now returning to higher
delivery levels. We also plan to participate in further
carbon offset programs with the refrigerants we have accumulated
for responsible destruction."
Retail Appliance Sales
ApplianceSmart, Inc., the company's retail division, posted
sales of $17.5 million for the second
quarter comparable with the same period of 2014. ApplianceSmart
reported a slight loss for operating income for the second quarters
of both 2015 and 2014. The 2015 second quarter retail
operating loss was approximately $0.6
million smaller than the loss reported in the first quarter
of the year.
Brad Bremer, president of
ApplianceSmart, commented, "In the second quarter we continued to
see stability in our top line sales however, results continue to be
impacted by lower margins in the highly competitive retail
landscape." Bremer added, "We are encouraged by the
growth of the LG and Napoleon lines, which we launched earlier in
the year. This has brought some additional traffic into our
stores and will certainly strengthen our brand portfolio as LG and
Napoleon continue to be integrated into our sales mix. We
have recently signed an agreement to add Marvel to our
assortment, which will further enhance our mix and bring an
additional line of product for customers we currently are not
serving. The availability of out-of-carton product also
continues to be strong, and with that we expect additional
opportunities to improve our margins. During the quarter we
began the relocation of our St. Louis
Park retail store to an updated and fresh location, and we
are now open in Hopkins. Our Minnesota warehousing and
delivery operations were also relocated to an existing
facility. These moves will result in significant occupancy
cost savings and efficiencies in our warehousing and
distribution."
Recycling Revenues
ARCA Recycling, Inc. saw year-over-year reductions in the
combination of appliance recycling fees and appliance replacement
revenues by $1.8 million to $9.4
million in the second quarter of 2015. The decline
from the prior year second quarter results can be attributed
primarily to customer driven delays in deliveries under one of our
largest utility energy efficiency programs. The Company believes
the Clean Power Plan (Section111(d) of the Clean Air Act) will
increase the demand for energy efficiency programs.
Cameron said, "We're very pleased with the success of our
appliance recycling programs and are happy to report that in
May 2015 deliveries returned to
historically normal levels in our largest replacement program."
Byproduct Revenues
The Company's byproduct revenues decreased from $4.2 million in the second quarter of 2014 to
$3.3 million in the second quarter of
2015. The decline in byproduct revenues was the result of decreased
steel and nonferrous metal pricing. Metal
prices experienced a significant drop during the first quarter
of 2015 and have recovered only slightly so far this year.
Steel selling prices have fallen as much as $185 per ton
(or 44%) over the prior year's first quarter peak.
Nonferrous pricing has seen dramatic declines as
well. 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
$0.7 million in commodities sold.
Revenues from the ARCA Advanced Processing, LLC ("AAP") joint
venture in Philadelphia also
reported a $0.8 million decline in
commodity revenues to $1.8 million,
compared with $2.6 million in the
second quarter of 2014. The decline was due primarily to decreased
steel and nonferrous metal revenues for the same reasons noted
above. The decline in ARCA byproduct revenues was
partially offset by $0.6 million in
revenues from the sale of carbon offsets in the second quarter of
fiscal 2015 as compared with no similar carbon offset revenues in
the second quarter of fiscal 2014.
Liquidity and Capital Resources
Cash and cash equivalents were $3.6
million as of July 4, 2015,
compared with $3.5 million as of
January 3, 2015. As of July 4, 2015, the Company had excess available
borrowing capacity under its revolving line of credit of
$5.1 million. Net working capital
decreased $2.6 million to
$7.0 million as of July 4, 2015. As a result of the loss in
the first quarter, ARCA reported to its bank that it was not in
compliance with the Company's revolving credit facility. The
credit facility is scheduled to expire in January 2016. ARCA
is working with its bank to enter into a replacement facility or
obtain a waiver for covenant non-compliance.
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.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(In
Thousands)
|
|
|
July 4,
2015
|
January
3,
2015
|
|
ASSETS
|
(unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
3,641
|
|
$
|
3,523
|
|
|
Accounts
receivable
|
11,115
|
|
10,954
|
|
|
Inventories
|
15,569
|
|
16,113
|
|
|
Income taxes
receivable
|
869
|
|
709
|
|
|
Other current
assets
|
1,226
|
|
1,096
|
|
|
Deferred income tax
assets
|
2,107
|
|
2,082
|
|
|
Total current
assets
|
34,527
|
|
34,477
|
|
|
Property and
equipment, net
|
11,361
|
|
11,761
|
|
|
|
|
|
|
|
Other
assets
|
750
|
|
708
|
|
|
Deferred income
taxes
|
14
|
|
14
|
|
|
Total assets
(a)
|
$
|
46,652
|
|
$
|
46,960
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
8,261
|
|
$
|
6,380
|
|
|
Accrued
expenses
|
7,890
|
|
8,133
|
|
|
Line of
credit
|
9,104
|
|
9,237
|
|
|
Current maturities of
long-term obligations
|
2,254
|
|
1,138
|
|
|
Total current
liabilities
|
27,509
|
|
24,888
|
|
|
Long-term
obligations, less current maturities
|
3,872
|
|
5,118
|
|
|
Other noncurrent
liabilities
|
246
|
|
369
|
|
|
Deferred income tax
liabilities
|
1,048
|
|
1,048
|
|
|
Total liabilities
(a)
|
32,675
|
|
31,423
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Shareholders'
equity
|
12,443
|
|
13,602
|
|
|
Noncontrolling
interest
|
1,534
|
|
1,935
|
|
|
13,977
|
|
15,537
|
|
|
Total liabilities and
shareholders' equity
|
$
|
46,652
|
|
$
|
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 $9,201 and $9,814 as of July 4, 2015 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 $2,600 and $2,338 as of July 4, 2015 and
January 3, 2015, respectively.
|
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
|
(In Thousands,
Except Per Share Amounts)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
July
4,
2015
|
June
28,
2014
|
|
July
4,
2015
|
June
28,
2014
|
|
Revenues:
|
|
|
|
|
|
|
Retail
|
$
|
17,494
|
|
$
|
17,461
|
|
|
$
|
34,592
|
|
$
|
34,062
|
|
|
Recycling
|
9,366
|
|
11,161
|
|
|
17,189
|
|
22,845
|
|
|
Byproduct
|
3,304
|
|
4,211
|
|
|
5,921
|
|
9,034
|
|
|
Total
revenues
|
30,164
|
|
32,833
|
|
|
57,702
|
|
65,941
|
|
|
|
|
|
|
|
|
Costs of
revenues
|
22,287
|
|
24,707
|
|
|
43,957
|
|
48,754
|
|
|
Gross
profit
|
7,877
|
|
8,126
|
|
|
13,745
|
|
17,187
|
|
|
Selling, general and
administrative expenses
|
7,255
|
|
7,296
|
|
|
15,123
|
|
14,671
|
|
|
Operating income
(loss)
|
622
|
|
830
|
|
|
(1,378)
|
|
2,516
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Interest expense, net
|
(245)
|
|
(228)
|
|
|
(566)
|
|
(489)
|
|
|
Other income (expense),
net
|
8
|
|
43
|
|
|
(141)
|
|
12
|
|
|
Income (loss) before
income taxes and noncontrolling interest
|
385
|
|
645
|
|
|
(2,085)
|
|
2,039
|
|
|
Provision for
(benefit from) income taxes
|
(101)
|
|
302
|
|
|
(586)
|
|
831
|
|
|
Net income
(loss)
|
486
|
|
343
|
|
|
(1,499)
|
|
1,208
|
|
|
Net loss (income)
attributable to noncontrolling interest
|
116
|
|
8
|
|
|
401
|
|
(129)
|
|
|
Net income (loss)
attributable to controlling interest
|
$
|
602
|
|
$
|
351
|
|
|
$
|
(1,098)
|
|
$
|
1,079
|
|
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
|
Basic
|
$
|
0.10
|
|
$
|
0.06
|
|
|
$
|
(0.19)
|
|
$
|
0.19
|
|
|
Diluted
|
$
|
0.10
|
|
$
|
0.06
|
|
|
$
|
(0.19)
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
Basic
|
5,801
|
|
5,581
|
|
|
5,798
|
|
5,579
|
|
|
Diluted
|
5,802
|
|
5,892
|
|
|
5,798
|
|
5,877
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
486
|
|
$
|
343
|
|
|
$
|
(1,499)
|
|
$
|
1,208
|
|
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
|
|
Effect of foreign
currency translation adjustments
|
(15)
|
|
70
|
|
|
(133)
|
|
(11)
|
|
|
Total other
comprehensive income (loss), net of tax
|
(15)
|
|
70
|
|
|
(133)
|
|
(11)
|
|
|
Comprehensive income
(loss)
|
471
|
|
413
|
|
|
(1,632)
|
|
1,197
|
|
|
Comprehensive loss
(income) attributable to noncontrolling interest
|
116
|
|
8
|
|
|
401
|
|
(129)
|
|
|
Comprehensive income
(loss) attributable to controlling interest
|
$
|
587
|
|
$
|
421
|
|
|
$
|
(1,231)
|
|
$
|
1,068
|
|
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SOURCE Appliance Recycling Centers of America, Inc.