MINNEAPOLIS, Aug. 6, 2014 /PRNewswire/ -- Appliance Recycling
Centers of America, Inc. (NASDAQ: ARCI), a leading provider of
appliance recycling and retailing services, today reported
operating results for the second quarter ended June 28, 2014.
Revenues for the second quarter of 2014 were $33.2 million, up 3% compared with the same
period in 2013, as a result of a 21% increase in appliance
replacement sales within the recycling division. Operating
income in the second quarter was $1.2
million and grew 1% compared with the same period of 2013.
Net earnings for the second quarter of 2014 were $0.6 million, or $0.10 per diluted share, compared with
$0.8 million, or $0.13 per diluted share, reported in the second
quarter of last year. The decline in quarter-over-quarter net
earnings was primarily the result of income taxes. In the
second quarter of 2013, the company reduced its effective tax rate
by utilizing net operating losses with a corresponding valuation
allowance that was not repeated in 2014.
For the six months ended June 28,
2014, total revenues increased 6% to $66.7 million, compared with revenues of
$62.7 million for the same period in
the prior year. Overall, the company reported net income for the
six months ended June 28, 2014, of
$1.6 million, or $0.27 per diluted share, compared with
$1.0 million, or $0.17 per diluted share, for the same period in
the prior year.
"ARCA reported another profitable quarter on increased
revenues," said Edward R. (Jack)
Cameron, president and chief executive officer of ARCA,
Inc. "We're especially pleased with the revenue and unit
volume growth in appliance replacements, which shows the unique
value of ARCA's turnkey, three-dimensional business model." ARCA
combines wholesale access to multiple appliance brands; an
established national delivery, installation and haul-away
infrastructure; and a multi-site, environmentally responsible
recycling system.
From time to time, the company is subject to sales and use tax
audits that could result in additional taxes, penalties and
interest owed to various taxing authorities. The California Board of Equalization is currently
conducting a sales and use tax examination covering the company's
California operations for 2011,
2012 and 2013. A large portion of the California operations in those years consisted
of appliance replacement sales under programs conducted by utility
companies on which the company did not assess, collect or remit
sales tax. For several reasons, including the fact that these
appliance replacement programs benefit low-income utility customers
with ratepayer funds, the company believes such transactions could
be exempt from taxation. It is possible that the California Board of Equalization will disagree
with the company's position and assess taxes, penalties and
interest in an amount that is material to its financial position
and results of operations. The company intends to vigorously
advance and defend its position in cooperation with local utilities
and governmental regulatory entities should taxes, penalties and
interest be assessed by the California Board of Equalization. At
this time, the company cannot estimate a range of potential impact
on its consolidated financial statements.
Retail Appliance Sales
ApplianceSmart, Inc., the company's retail division, posted
sales of $17.5 million for the second
quarter, a decrease of $0.3 million,
or 2%, compared with the same period of 2013. The decline was due
mainly to a reduction in same-store sales of $0.2 million, or 1%, and the closure of a store
during the second quarter of 2013. For the second quarter of 2014,
ApplianceSmart reported an operating loss of $43,000, compared with operating income of
$129,000 (which included the effect
of a $348,000 favorable inventory
reserve adjustment) in the same period of the prior year.
Brad Bremer, president of
ApplianceSmart, commented, "Considering that last year's second
quarter results included significant favorable inventory
adjustments, our retail appliance business actually showed improved
quarter-over-quarter operating performance." Bremer added, "And
this was in spite of considerable market competition and pricing
pressure."
Recycling Revenues
ARCA Recycling, Inc. grew the combination of its appliance
recycling fees and appliance replacement revenues by $1.3 million to $11.5
million in the second quarter of 2014. Appliance
replacement revenues increased $1.5
million, while appliance recycling fees declined
$0.2 million. Appliance replacement
unit volume in the second quarter of 2014 grew by 15% while the
company's recycling-only program volumes decreased by 1% due mainly
to the cancellation of two contracts by the utilities supporting
the programs.
Mark Eisenschenk, president of
ARCA Recycling, Inc. and chief operating officer of ARCA, said,
"We're pleased with the success of our appliance replacement
programs. Strategically we are continually working to grow this
segment of our business across North
America because it perfectly fits our core capabilities." He
added, "Program durations and funding levels can be unpredictable –
one major contract that provided a significant portion of our
appliance replacement revenue this year is expected to expend its
2014 budget by the end of the third quarter." Mr. Eisenschenk noted
that although this particular program began in 2010 and has
obtained additional funding several times, most recently earlier
this year, there is no assurance of future funding.
Byproduct Revenues
The company's byproduct revenues, excluding the AAP joint
venture in Philadelphia, grew
$0.1 million to $1.6 million, compared with the second quarter of
2013. The increase is principally a function of an increase in the
volume of recyclable appliances and to a lesser extent receiving
higher scrap prices for certain materials.
Revenues from AAP are reported in byproduct revenues. Such
revenues declined $0.1 million to
$2.6 million, compared with
$2.7 million in the second quarter of
2013. AAP's gross margin improved to 21%, compared with 16%
in the same period of 2013, as a result of a reduction in the cost
of appliances purchased under contract. AAP's operating income for
the second quarter improved by $57,000 compared with the same period of
2013.
Liquidity and Capital Resources
Cash and cash equivalents were $2.5
million as of June 28, 2014,
compared with $1.9 million as of
December 28, 2013. As of June 28, 2014, the company had excess available
borrowing capacity under its revolving line of credit of
$5.8 million compared with
$4.0 million as of December 28, 2013. Net working capital increased
$2.3 million to $12.9 million as of June
28, 2014, compared with $10.6
million as of December 28,
2013.
Conference Call Information
In conjunction with this release, Appliance Recycling Centers of
America, Inc. will host a conference call tomorrow, August 7, 2014, at 10:00
a.m. CDT. To participate in the conference call, please dial
the following number ten minutes prior to the scheduled time:
800-682-9959. A replay of the conference call will be available on
the company's website, www.ARCAInc.com, approximately 24 to 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
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
28,
2014
|
December
28,
2013
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
2,534
|
$
1,948
|
Accounts receivable,
net of allowance of $43 and $27, respectively
|
11,839
|
12,278
|
Inventories, net of
reserves of $227 and $175, respectively
|
17,345
|
16,654
|
Income taxes
receivable
|
111
|
82
|
Other current
assets
|
782
|
622
|
Deferred income tax
assets
|
523
|
523
|
Total current
assets
|
33,134
|
32,107
|
Property and
equipment, net
|
11,718
|
11,424
|
Restricted
cash
|
–
|
500
|
Other
assets
|
840
|
927
|
Deferred income
taxes
|
21
|
21
|
Total assets
(a)
|
$
45,713
|
$
44,979
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
6,415
|
$
5,880
|
Accrued
expenses
|
3,970
|
4,806
|
Line of
credit
|
8,371
|
9,661
|
Current maturities of
long-term obligations
|
1,196
|
1,131
|
Income taxes
payable
|
270
|
–
|
Total current
liabilities
|
20,222
|
21,478
|
|
|
|
Long-term obligations,
less current maturities
|
5,592
|
5,447
|
Deferred income tax
liabilities
|
1,092
|
1,092
|
Total liabilities
(a)
|
26,906
|
28,017
|
|
|
|
Commitments and
contingencies
|
–
|
–
|
|
|
|
Shareholders'
equity:
|
|
|
Common Stock, no par
value; 10,000 shares authorized; issued and outstanding:
5,581
shares and 5,571 shares, respectively
|
21,010
|
20,846
|
Accumulated
deficit
|
(3,768)
|
(5,331)
|
Accumulated other
comprehensive loss
|
(475)
|
(464)
|
Total shareholders'
equity
|
16,767
|
15,051
|
Noncontrolling
interest
|
2,040
|
1,911
|
|
18,807
|
16,962
|
Total liabilities and
shareholders' equity
|
$
45,713
|
$
44,979
|
|
|
|
|
|
(a)
|
Assets of ARCA
Advanced Processing, LLC (AAP), ARCA's consolidated variable
interest entity, that can only be used to settle obligations of AAP
were $10,242 and $9,949 as of June 28, 2014, and December 28, 2013,
respectively. Liabilities of AAP for which creditors do not have
recourse to the general credit of Appliance Recycling Centers of
America, Inc. were $2,211 and $1,874 as of June 28, 2014, and
December 28, 2013, respectively.
|
|
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(In Thousands,
Except Per Share Amounts)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
28,
2014
|
June
29,
2013
|
|
June
28,
2014
|
June
29,
2013
|
Revenues:
|
|
|
|
|
|
Retail
|
$
17,461
|
$
17,801
|
|
$
34,062
|
$
35,860
|
Recycling
|
11,539
|
10,260
|
|
23,607
|
18,560
|
Byproduct
|
4,211
|
4,212
|
|
9,034
|
8,277
|
Total
revenues
|
33,211
|
32,273
|
|
66,703
|
62,697
|
|
|
|
|
|
|
Costs of
revenues
|
24,707
|
23,778
|
|
48,754
|
46,292
|
Gross
profit
|
8,504
|
8,495
|
|
17,949
|
16,405
|
Selling, general and
administrative expenses
|
7,296
|
7,295
|
|
14,671
|
14,780
|
Operating
income
|
1,208
|
1,200
|
|
3,278
|
1,625
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest
expense, net
|
(205)
|
(322)
|
|
(446)
|
(605)
|
Other
income (expense), net
|
43
|
(7)
|
|
12
|
(20)
|
Income before income
taxes and noncontrolling interest
|
1,046
|
871
|
|
2,844
|
1,000
|
Provision for income
taxes
|
462
|
145
|
|
1,152
|
145
|
Net income
|
584
|
726
|
|
1,692
|
855
|
Net (income) loss
attributable to noncontrolling interest
|
8
|
42
|
|
(129)
|
97
|
Net income
attributable to controlling interest
|
$
592
|
$
768
|
|
$
1,563
|
$
952
|
|
|
|
|
|
|
Income per common
share:
|
|
|
|
|
|
Basic
|
$
0.11
|
$
0.14
|
|
$
0.28
|
$
0.17
|
Diluted
|
$
0.10
|
$
0.13
|
|
$
0.27
|
$
0.17
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,581
|
5,556
|
|
5,579
|
5,556
|
Diluted
|
5,892
|
5,709
|
|
5,877
|
5,696
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
584
|
$
726
|
|
$
1,692
|
$
855
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
|
Effect of foreign
currency translation adjustments
|
70
|
(78)
|
|
(11)
|
(136)
|
Total other
comprehensive income (loss), net of tax
|
70
|
(78)
|
|
(11)
|
(136)
|
Comprehensive
income
|
654
|
648
|
|
1,681
|
719
|
Comprehensive loss
(income) attributable to noncontrolling interest
|
8
|
42
|
|
(129)
|
97
|
Comprehensive income
attributable to controlling interest
|
$
662
|
$
690
|
|
$
1,552
|
$
816
|
|
|
|
|
|
|
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SOURCE Appliance Recycling Centers of America