MINNEAPOLIS, Aug. 5, 2013 /PRNewswire/ -- Appliance Recycling
Centers of America, Inc. (Nasdaq: ARCI), a leading provider of
appliance retailing and recycling services, today reported
operating results for the second quarter ended June 29, 2013.
Second quarter summary:
- Increased total revenues by 9.2% to $32.3 million compared with $29.5 million in the second quarter of 2012.
- Grew total revenues through a 160% increase in appliance
replacement program revenues partially offset by a 6% decline in
retail revenues and a 9% decline in ARCA Advanced Processing, LLC
(AAP) revenues.
- Generated consolidated net income of $0.8 million, or $0.13 per diluted share, compared with a
consolidated net loss of $(0.6)
million, or $(0.12) per
diluted share, in the second quarter of 2012.
- Recorded a favorable $0.4 million
adjustment to the inventory reserve at
ApplianceSmart®.
- Closed one underperforming ApplianceSmart store in the
Minnesota market, ending the
quarter with 18 stores compared with 21 stores at the end of the
second quarter of 2012.
- Restructured and relocated the call center supporting utility
contracts, moving it from California to Minnesota.
- Appointed Mark Eisenschenk to
chief operating officer of the Company and president of ARCA
Recycling, Inc.
"We're pleased to build on last quarter's positive momentum with
continued quarterly revenue growth—both sequentially and
year-over-year," said Edward R. (Jack)
Cameron, president and chief executive officer of ARCA, Inc.
"The strength of our appliance replacement programs in particular
demonstrates both their growing popularity with utilities and our
business model's unique suitability to capitalize on this
trend.
"Across our Company, profitability improvements enabled us to
comfortably satisfy the conditions of our credit agreement with PNC
Bank, including the planned monthly EBITDA covenants," noted
Cameron.
In regard to the Company's retail appliance business,
ApplianceSmart same store sales for the second quarter of 2013
declined 3.9% compared with the same period of 2012. Contributing
factors included increased competition from national chains with
expanded inventory offerings and continued economic softness. Last
month the National Retail Federation (NRF) reported that appliance
and electronics stores' sales decreased by 2.3% unadjusted
year-over-year in June; the NRF cited "stagnantly high
unemployment, higher taxes and lingering policy uncertainty." In
the second quarter, ApplianceSmart total retail revenues decreased
6.1% to $17.8 million compared with
the same period of 2012, resulting primarily from the decline in
same-store sales and closure of three stores that were operating in
the same period of 2012.
For the Company's appliance recycling business, recycling
revenues, which are comprised of appliance recycling fees and
appliance replacement program revenues, increased 67.0% to
$10.3 million in the second quarter
of 2013 from $6.1 million in the same
period of 2012. Appliance replacement program revenues increased
$4.4 million while appliance
recycling fees declined $0.2 million.
The Company reported a 134% increase in appliance replacement units
and a 9% increase in overall recycling volumes compared with the
second quarter of 2012. A strategic benefit of having more than one
business line is that ARCA utilizes its manufacturer relationships
with ApplianceSmart to provide cost-effective solutions to
utilities sponsoring appliance replacement programs.
These programs are expected to expand nationally, as evidenced
by a 2013 study commissioned by the U.S. Department of Energy that
concluded energy efficiency programs funded by utility customers
are "poised for dramatic growth over the next 10 to 15 years."
Averaging this study's three growth projections results in a 5%
annual growth rate through 2025.
The Company's byproduct revenues, excluding AAP, remained flat
at $1.5 million compared with the
second quarter of 2012. The Company's overall increase in recycling
volumes was offset by a decline in steel scrap prices.
Revenues from the AAP joint venture, reported in byproduct
revenues, declined 8.9% to $2.7
million compared with $2.9
million in the second quarter of 2012. The decline was due
to lower steel and nonferrous scrap prices. Overall gross tons
received for processing increased 5.4% and average steel scrap
prices declined 11.1% per gross ton compared with the second
quarter of 2012. AAP's gross margin declined to 16.3% compared with
24.8% in the same period of 2012. AAP's operating loss for the
second quarter was $(6,000) compared
with operating income of $264,000
during the same period of 2012. The decline in gross margin and
operating income was primarily the result of lower prices for steel
and non-ferrous scrap and higher depreciation expense.
Overall gross profit as a percentage of total revenues decreased
to 26.3% for the second quarter of 2013 compared with 26.9% during
the same period of 2012. The decline in overall gross profit
percentage resulted primarily from lower byproduct revenues and the
decline in AAP's gross margin. These factors were partially offset
by a 220 basis point improvement in ApplianceSmart's gross margin
due primarily to the favorable inventory adjustment mentioned
previously.
For the six months ended June 29,
2013, total revenues increased 6.3% to $62.7 million, compared with revenues of
$59.0 million for the same period in
the prior fiscal year. Overall, the Company reported consolidated
net income of $1.0 million, or
$0.17 per diluted share, compared
with a consolidated net loss of $0.7
million, or $0.13 per diluted
share, in the first six months of 2012.
"At the halfway point of 2013, we've solidified our performance
in many key areas while strengthening our corporate organization
with the addition of Mark
Eisenschenk as the Company's chief operating officer and the
president of ARCA Recycling," Cameron concluded. "I believe we have
the right organization, strategic partners and management team in
place to capitalize on the growth opportunities before us."
Liquidity and Capital Resources
Cash and cash equivalents as of June 29,
2013, were $2.7 million,
compared with $3.2 million as of
December 29, 2012. As of June 29, 2013, the Company had $4.3 million of available borrowings under its
revolving line of credit compared with $2.5
million as of December 29,
2012. Net working capital of $7.7
million increased $0.1 million
as of June 29, 2013, compared with
$7.6 million as of December 29, 2012. The increase was due primarily
to a lower outstanding balance under the Company's revolving line
of credit.
Conference Call Information
In conjunction with this release, Appliance Recycling Centers of
America, Inc. will host a conference call tomorrow, August 6, 2013, at 10:00
a.m. CDT. To participate in the conference call, please dial
the following number ten minutes prior to the scheduled time:
800-354-6885. 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
approximately 150 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)
|
|
|
June
29,
2013
|
December
29,
2012
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
2,659
|
$
3,174
|
Accounts receivable,
net of allowance of $50 and $8, respectively
|
9,337
|
6,256
|
Inventories, net of
reserves of $149 and $682, respectively
|
14,040
|
17,274
|
Income taxes
receivable
|
511
|
522
|
Other current
assets
|
1,301
|
1,332
|
Total current
assets
|
27,848
|
28,558
|
Property and
equipment, net
|
11,728
|
12,248
|
Restricted
cash
|
500
|
–
|
Other
assets
|
1,033
|
973
|
Deferred income
taxes
|
24
|
25
|
Total assets
(a)
|
$
41,133
|
$
41,804
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
5,912
|
$
4,957
|
Accrued
expenses
|
4,727
|
4,310
|
Line of
credit
|
8,058
|
10,559
|
Current maturities of
long-term obligations
|
1,204
|
955
|
Income taxes
payable
|
91
|
–
|
Deferred income tax
liabilities
|
146
|
146
|
Total current
liabilities
|
20,138
|
20,927
|
|
|
|
Long-term
obligations, less current maturities
|
5,940
|
6,357
|
Deferred gain, net of
current portion
|
122
|
365
|
Deferred income tax
liabilities
|
921
|
921
|
Total liabilities
(a)
|
27,121
|
28,570
|
|
|
|
Commitments and
contingencies
|
–
|
–
|
|
|
|
Shareholders'
equity:
|
|
|
Common Stock, no par
value; 10,000 shares authorized; issued and outstanding:
5,556 shares at
both periods
|
20,636
|
20,577
|
Accumulated
deficit
|
(7,697)
|
(8,649)
|
Accumulated other
comprehensive loss
|
(426)
|
(290)
|
Total shareholders'
equity
|
12,513
|
11,638
|
Noncontrolling
interest
|
1,499
|
1,596
|
|
14,012
|
13,234
|
Total liabilities and
shareholders' equity
|
$
41,133
|
$
41,804
|
|
|
|
(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 $9,793 and $10,045 as of June 29, 2013, and December
29, 2012, respectively. Liabilities of AAP for which creditors do
not have recourse to the general credit of Appliance Recycling
Centers of America, Inc. were $2,216 and $1,948 as of June 29,
2013, and December 29, 2012, respectively.
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
|
(In Thousands,
Except Per Share Amounts)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
29,
2013
|
June
30,
2012
|
|
June
29,
2013
|
June
30,
2012
|
Revenues:
|
|
|
|
|
|
Retail
|
$
17,801
|
$
18,964
|
|
$
35,860
|
$
38,720
|
Recycling
|
10,260
|
6,145
|
|
18,560
|
11,410
|
Byproduct
|
4,212
|
4,434
|
|
8,277
|
8,857
|
Total
revenues
|
32,273
|
29,543
|
|
62,697
|
58,987
|
|
|
|
|
|
|
Costs of
revenues
|
23,778
|
21,606
|
|
46,292
|
43,106
|
Gross
profit
|
8,495
|
7,937
|
|
16,405
|
15,881
|
Selling, general and
administrative expenses
|
7,295
|
8,130
|
|
14,780
|
15,990
|
Operating income
(loss)
|
1,200
|
(193)
|
|
1,625
|
(109)
|
|
|
|
|
|
|
Other
expense:
|
|
|
|
|
|
Interest
expense, net
|
(322)
|
(279)
|
|
(605)
|
(533)
|
Other
expense, net
|
(7)
|
(25)
|
|
(20)
|
(9)
|
Income (loss) before
income taxes and noncontrolling interest
|
871
|
(497)
|
|
1,000
|
(651)
|
Provision for
(benefit of) income taxes
|
145
|
54
|
|
145
|
(23)
|
Net income
(loss)
|
726
|
(551)
|
|
855
|
(628)
|
Net (income) loss
attributable to noncontrolling interest
|
42
|
(90)
|
|
97
|
(79)
|
Net income (loss)
attributable to controlling interest
|
$
768
|
$
(641)
|
|
$
952
|
$
(707)
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
0.14
|
$
(0.12)
|
|
$
0.17
|
$
(0.13)
|
Diluted
|
$
0.13
|
$
(0.12)
|
|
$
0.17
|
$
(0.13)
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,556
|
5,555
|
|
5,556
|
5,546
|
Diluted
|
5,709
|
5,555
|
|
5,696
|
5,546
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
726
|
$
(551)
|
|
$
855
|
$
(628)
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
|
Effect of foreign
currency translation adjustments
|
(78)
|
(71)
|
|
(136)
|
(11)
|
Total other
comprehensive income (loss), net of tax
|
(78)
|
(71)
|
|
(136)
|
(11)
|
Comprehensive income
(loss)
|
648
|
(622)
|
|
719
|
(639)
|
Comprehensive loss
(income) attributable to noncontrolling interest
|
42
|
(90)
|
|
97
|
(79)
|
Comprehensive income
(loss) attributable to controlling interest
|
$
690
|
$
(712)
|
|
$
816
|
$
(718)
|
|
|
|
|
|
|
SOURCE Appliance Recycling Centers of America, Inc.