MINNEAPOLIS, Aug. 18, 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 period ended July 2,
2016.
Revenues for the second quarter ended July 2, 2016 were $24.8
million, down 17.9% compared with the same period in 2015,
due to decreased recycling replacement and byproduct
revenues. Net loss for the second quarter of 2016 was
$2.1 million, or $0.35 loss per diluted share including a one-time
change of management expense of $0.7
million and $0.8 million tax
provision, compared with net income of $0.6
million, or $0.10 income per
diluted share, reported in the second quarter of 2015.
Revenues for the six months ended July 2,
2016, were $50.1 million
dollars, down 13.2%, for the same period in 2015.
Overall the company reported a net loss for the six months ended
July 2, 2016, of $2.6 million, or $0.43 loss per diluted share compared with a loss
of $1.1 million or $0.19 loss per diluted share for the same period
in 2015.
Second Quarter Highlights
During the second quarter of 2016:
- Revenues were down by $5.4
million or 17.9% for the quarter ended July 2, 2016 compared to the same quarter of
2015, primarily the result of the decline in our recycling
replacement programs for several large customers.
- Gross profit margin was 26.0% for the quarter ended
July 2, 2016 compared to 26.1% for
the same quarter of 2015, as we worked to improve delivery margins
despite the declines of revenues.
- Selling, general and administrative expenses were up by
$0.3 million as the company had a
management change of key leaders during the quarter which added
$0.7 million in one-time expense
which was offset by additional cost savings throughout the
quarter.
- There were declines in other byproduct revenues of $1.0 million as a result of the continuation of
the depressed levels in the price of scrap steel and other
non-ferrous metals. In addition, the company did not have carbon
offset revenue as expected in the second quarter. The carbon offset
was $0.6 million in revenues in the
second quarter of 2015.
- Taxes expense of $0.8 million was
recorded as we booked a valuation adjustment on a deferred tax
asset.
- Cash flow from operations resulted in an increase of
$2.7 million for the quarter ended
July 2, 2016 which was used to reduce
our line of credit and debt by $2.6
million for same quarter.
Summary
The quarter was lower than expected as our revenues were down
and our receipt of carbon offset revenue was delayed. We
recognized $1.6 million in carbon
offset revenues in the third quarter of 2016, which would have
dramatically changed our second quarter results had we receive the
approval a few weeks earlier by the Air Quality Board in
California.
Overall, there has been weakness in the scrap and other metal
markets in which we sell, but we are adjusting our costs and
planning accordingly for the remainder of the year and
beyond. We have been successful to amend existing
contracts to improve pricing and have been entering into contracts
for new business that is less dependent of the recovery of
byproduct revenues.
Retail Appliance Segment
ApplianceSmart, Inc., the company's retail segment, posted sales
of $16.3 million for the second
quarter ended July 2, 2016, a
decrease of $1.4 million, or 8.0%,
compared with the same period of 2015. The decrease was due
to downward price pressure by our competitors causing price
compression on our business. ApplianceSmart reported a
segment operating loss of $0.5
million for quarter ended July 2,
2016, compared to a zero in the same period of the prior
year.
Our overall gross profit margins increased to 26.9% in the
quarter ended July 2, 2016 from 26.6%
as a result of improved purchasing terms, a favorable product sales
mix to categories with higher gross margin rates and increased
vendor support. We are continuing to review our retail space
requirements and markets in which we are operating to increase the
economies of scale of our processing centers to achieve better
results.
Recycling Segment
ARCA Recycling, Inc. the company's recycling segment posted
revenues of $8.5 million for the
second quarter ended July 2, 2016, a
decrease of $4.0 million or
32.0%. Appliance replacement revenues decreased $3.7 million as several large customers have
delayed or canceled their programs. Byproduct revenues from
the sale of raw materials and carbon offsets decreased by
$1.1 million for the period ended
July 2, 2016 since we did not have a
carbon offset sale and the price of scrap was lower in second
quarter 2016. The recycling program which gained customers
grew by $0.8 million over the same
period
Byproduct Revenues
The company's byproduct revenues are included in the segment
information above, but we want to highlight the commodity prices of
this product line. Byproduct revenue decreased from
$3.2 million in the second quarter of
2015 to $2.2 million in the second
quarter ended July 2, 2016. The
decline in byproduct revenues was primarily due to the lack of
carbon offset revenues in the second quarter of fiscal 2016,
compared to $0.6 million in the
second quarter of fiscal 2015, and declines in revenues of
$0.4 million in the second quarter
ended July 2, 2016 due to decreased
steel and non-ferrous metal pricing. Steel prices remained
low for much of 2015 and depressed pricing continued in the first
quarter of 2016 but began to pick up a little in the second
quarter. They have since retreated in the third quarter
creating further challenges in our business which is being
assessed.
The company had begun to see steel prices moving in a more
favorable direction in April and May with selling prices near
$290 per ton in Philadelphia, a level not seen since
January 2015; however, they have
begun to retreat and currently are around $215 per ton in August.
Liquidity and Capital Resources
Cash and cash equivalents were $2.2
million as of July 2, 2016,
compared with $2.0 million as of
January 2, 2016. As of
July 2, 2016, the company had excess
available borrowing capacity under its revolving line of credit of
$2.6 million.
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)
|
|
|
July
2,
2016
|
January
2,
2016
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
|
2,249
|
|
$
|
1,969
|
|
Accounts
receivable
|
6,656
|
|
11,536
|
|
Inventories
|
15,932
|
|
16,733
|
|
Income taxes
receivable
|
242
|
|
1,126
|
|
Other current
assets
|
1,073
|
|
1,350
|
|
Deferred income tax
assets
|
1,301
|
|
1,657
|
|
Total current
assets
|
27,453
|
|
34,371
|
|
Property and
equipment, net
|
10,566
|
|
10,985
|
|
Restricted
cash
|
500
|
|
500
|
|
Other
assets
|
583
|
|
596
|
|
Deferred income
taxes
|
244
|
|
327
|
|
Total assets
(a)
|
$
|
39,346
|
|
$
|
46,779
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
|
7,427
|
|
$
|
7,019
|
|
Accrued
expenses
|
8,241
|
|
8,934
|
|
Line of
credit
|
7,786
|
|
12,668
|
|
Current maturities of
long-term obligations
|
2,803
|
|
1,251
|
|
Total current
liabilities
|
26,257
|
|
29,872
|
|
Long-term
obligations, less current maturities
|
3,270
|
|
4,506
|
|
Other noncurrent
liabilities
|
402
|
|
357
|
|
Total liabilities
(a)
|
29,929
|
|
34,735
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
Shareholders'
equity
|
8,953
|
|
11,324
|
|
Noncontrolling
interest
|
464
|
|
720
|
|
|
9,417
|
|
12,044
|
|
Total liabilities and
shareholders' equity
|
$
|
39,346
|
|
$
|
46,779
|
|
|
|
|
(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 $8,443 and $8,856 as of July 2, 2016 and January 2,
2016, respectively. Liabilities of AAP for which creditors do not
have recourse to the general credit of Appliance Recycling Centers
of America, Inc. were $3,414 and $2,838 as of July 2, 2016 and
January 2, 2016, respectively.
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In Thousands,
Except Per Share Amounts)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
July
2,
2016
|
July
4,
2015
|
|
July
2,
2016
|
July
4,
2015
|
Revenues:
|
|
|
|
|
|
Retail
|
$
|
16,096
|
|
$
|
17,494
|
|
|
$
|
32,666
|
|
$
|
34,592
|
|
Recycling
|
6,413
|
|
9,366
|
|
|
13,349
|
|
17,189
|
|
Byproduct
|
2,247
|
|
3,304
|
|
|
4,086
|
|
5,921
|
|
Total
revenues
|
24,756
|
|
30,164
|
|
|
50,101
|
|
57,702
|
|
|
|
|
|
|
|
Costs of
revenues
|
18,320
|
|
22,287
|
|
|
37,474
|
|
43,957
|
|
Gross
profit
|
6,436
|
|
7,877
|
|
|
12,627
|
|
13,745
|
|
Selling, general and
administrative expenses
|
7,529
|
|
7,255
|
|
|
14,507
|
|
15,123
|
|
Operating income
(loss)
|
(1,093)
|
|
622
|
|
|
(1,880)
|
|
(1,378)
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest expense, net
|
(304)
|
|
(245)
|
|
|
(587)
|
|
(566)
|
|
Other income (expense),
net
|
(26)
|
|
8
|
|
|
94
|
|
(141)
|
|
Income (loss) before
income taxes and noncontrolling interest
|
(1,423)
|
|
385
|
|
|
(2,373)
|
|
(2,085)
|
|
Provision for
(benefit from) income taxes
|
758
|
|
(101)
|
|
|
438
|
|
(586)
|
|
Net income
(loss)
|
(2,181)
|
|
486
|
|
|
(2,811)
|
|
(1,499)
|
|
Net loss (income)
attributable to noncontrolling interest
|
78
|
|
116
|
|
|
257
|
|
401
|
|
Net income (loss)
attributable to controlling interest
|
$
|
(2,103)
|
|
$
|
602
|
|
|
$
|
(2,554)
|
|
$
|
(1,098)
|
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
|
(0.35)
|
|
$
|
0.10
|
|
|
$
|
(0.43)
|
|
$
|
(0.19)
|
|
Diluted
|
$
|
(0.35)
|
|
$
|
0.10
|
|
|
$
|
(0.43)
|
|
$
|
(0.19)
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,929
|
|
5,801
|
|
|
5,915
|
|
5,798
|
|
Diluted
|
5,929
|
|
5,802
|
|
|
5,915
|
|
5,798
|
|
|
|
|
|
|
|
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SOURCE Appliance Recycling Centers of America, Inc.