MINNEAPOLIS, Nov. 3, 2014 /PRNewswire/ -- Appliance Recycling
Centers of America, Inc. (NASDAQ: ARCI), a leading provider of
appliance recycling and retailing services, today reported its
operating results for the third quarter ended September 27, 2014.
Revenues for the third quarter of 2014 were $33.6 million, up $0.1
million compared with the same period in 2013. Operating
income in the third quarter was $1.1
million, a $0.7 million
decline from the same period of 2013. Net earnings for the third
quarter of 2014 were $0.6 million, or
$0.09 per diluted share, compared
with $1.1 million, or $0.20 per diluted share, reported in the third
quarter of 2013. In the third quarter of 2013, the company's net
earnings per diluted share benefitted by $0.10 from reducing its income tax expense by
utilizing net operating losses with a corresponding valuation
allowance that was not repeated in same period of 2014. In
the third quarter of 2014, the company reported an effective tax
rate of 40% compared with 15% in the same quarter of 2013.
For the nine months ended September 27,
2014, total revenues increased 4% to $100.3 million, compared with revenues of
$96.2 million for the same period in
the prior year. Year-to-date operating income this year is
$4.4 million, which is $0.9 million ahead of last year. The company
reported net income for the nine months ended September 27, 2014, of $2.1 million, or $0.37 per diluted share, compared with
$2.1 million, or $0.36 per diluted share, for the same period in
the prior year. Prior-year results were favorably affected by
utilization of tax net operating losses.
"While year-to-date results are encouraging, with sales topping
$100 million and operating income
running $900,000 better than last
year, results for the third quarter fell short of our
expectations," said Mark
Eisenschenk, president and chief executive officer of ARCA,
Inc.
Continuing, Mr. Eisenschenk said, "Performance at ApplianceSmart
was impacted by both a $300,000 sales
decline and $200,000 in margin
compression. Also during the quarter, operating income at ARCA
Advanced Processing (AAP) was $300,000 below last year as a result of a decline
in non-ferrous scrap metal revenues, increased inbound freight, and
additional labor costs. However, our appliance replacement
business, which is a component of our recycling division, continued
to have a steady, favorable impact on our results."
Mr. Eisenschenk added, "Our focus is growing sales across the
company. We just signed two new utility recycling contracts that
should begin to generate revenue in 2015. We're pursuing
additional appliance replacement business and working on
initiatives to better target and serve retail appliance
customers."
He concluded by saying, "We're also working on ways to decrease
overhead, including reducing the size of our retail stores and
aggressively managing third-party call center costs. And we're
committed to improving operational efficiencies throughout the
company."
Recycling
The recycling division grew the combination of its appliance
recycling fees and appliance replacement revenues by $0.4 million to $12.2
million in the third quarter of 2014. Appliance
replacement revenues increased $0.6
million, while appliance recycling fees declined
$0.2 million. The company's
recycling-only program volumes decreased by 4% due mainly to the
cancellation of two contracts by the utilities supporting the
programs.
Sales Tax Matter
As stated in the company's second quarter press release in
August, the California Board of
Equalization is conducting a sales and use tax examination covering
the company's appliance replacement sales in California during 2011-2013. The company did
not accrue or pay sales taxes relating to this matter for the
three-year period under examination or thereafter. It is
possible that this Board will assess taxes, penalties and interest
in an amount material to the company's financial position and
results of operations. This situation has changed little since
August; the company will issue updates when appropriate.
Byproducts
The company's byproduct revenues, excluding the AAP joint
venture in Philadelphia, grew
$0.1 million to $1.8 million, compared with the third quarter of
2013. The increase is principally a function of higher scrap prices
for certain materials.
Revenues from AAP are reported in byproduct revenues. Such
revenues declined $0.1 million to
$2.9 million, compared with
$3.0 million in the third quarter of
2013. AAP's gross margin declined to 18.6%, compared with
27.0% in the same period of 2013, as a result of reduced revenue
from high-margin non-ferrous scrap metal, increased freight costs
related to incoming appliances, and higher labor costs to install
equipment and to meet the demands of sales promotions under its
major recycling contract. AAP's operating income for the third
quarter declined by $300,000 compared
with the same period of 2013.
Retail Appliances
ApplianceSmart, Inc., the company's retail division, posted
sales of $16.7 million for the third
quarter, a decrease of $0.3 million,
or 2%, compared with the same period of 2013. For the third quarter
of 2014, ApplianceSmart reported an operating loss of $595,000, compared with a $164,000 loss in the same period of the prior
year. The higher operating loss is the result of the sales
decline and margin compression.
Liquidity and Capital Resources
Cash and cash equivalents were $2.9
million as of September 27,
2014, compared with $1.9
million as of December 28,
2013. As of September 27,
2014, the company had excess available borrowing capacity
under its revolving line of credit of $6.5
million compared with $4.0
million as of December 28,
2013. Net working capital increased $3.2 million to $13.8
million as of September 27,
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, November 4, 2014, at 10:00
a.m. CST. To participate in the conference call, please dial
the following number ten minutes prior to the scheduled time:
800-919-8031. 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)
|
|
|
September
27,
2014
|
December
28,
2013
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
2,883
|
$
1,948
|
Accounts receivable,
net of allowance of $58 and $27, respectively
|
11,681
|
12,278
|
Inventories, net of
reserves of $280 and $175, respectively
|
16,520
|
16,654
|
Income taxes
receivable
|
107
|
82
|
Other current
assets
|
1,368
|
622
|
Deferred income tax
assets
|
523
|
523
|
Total current
assets
|
33,082
|
32,107
|
Property and
equipment, net
|
11,485
|
11,424
|
Restricted
cash
|
–
|
500
|
Other
assets
|
791
|
927
|
Deferred income
taxes
|
20
|
21
|
Total assets
(a)
|
$
45,378
|
$
44,979
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
6,765
|
$
5,880
|
Accrued
expenses
|
3,939
|
4,806
|
Line of
credit
|
7,584
|
9,661
|
Current maturities of
long-term obligations
|
1,154
|
1,131
|
Income taxes
payable
|
145
|
–
|
Total current
liabilities
|
19,587
|
21,478
|
|
|
|
Long-term obligations,
less current maturities
|
5,357
|
5,447
|
Deferred income tax
liabilities
|
1,092
|
1,092
|
Total liabilities
(a)
|
26,036
|
28,017
|
|
|
|
Commitments and
contingencies
|
–
|
–
|
|
|
|
Shareholders'
equity:
|
|
|
Common Stock, no par
value; 10,000 shares authorized; issued and
outstanding: 5,788 shares and 5,571 shares,
respectively
|
21,132
|
20,846
|
Accumulated
deficit
|
(3,212)
|
(5,331)
|
Accumulated other
comprehensive loss
|
(567)
|
(464)
|
Total shareholders'
equity
|
17,353
|
15,051
|
Noncontrolling
interest
|
1,989
|
1,911
|
|
19,342
|
16,962
|
Total liabilities and
shareholders' equity
|
$
45,378
|
$
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 $10,052 and $9,949 as of September 27, 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 $2,248 and $1,874 as of September 27, 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
|
|
Nine Months
Ended
|
|
September
27,
2014
|
September
28,
2013
|
|
September
27,
2014
|
September
28,
2013
|
Revenues:
|
|
|
|
|
|
Retail
|
$
16,712
|
$
17,018
|
|
$
50,774
|
$
52,878
|
Recycling
|
12,238
|
11,823
|
|
35,845
|
30,383
|
Byproduct
|
4,682
|
4,697
|
|
13,716
|
12,974
|
Total
revenues
|
33,632
|
33,538
|
|
100,335
|
96,235
|
|
|
|
|
|
|
Costs of
revenues
|
24,937
|
24,445
|
|
73,691
|
70,737
|
Gross
profit
|
8,695
|
9,093
|
|
26,644
|
25,498
|
Selling, general and
administrative expenses
|
7,612
|
7,291
|
|
22,283
|
22,071
|
Operating
income
|
1,083
|
1,802
|
|
4,361
|
3,427
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest
expense, net
|
(194)
|
(320)
|
|
(640)
|
(925)
|
Other
income (expense), net
|
(67)
|
7
|
|
(55)
|
(13)
|
Income before income
taxes and noncontrolling interest
|
822
|
1,489
|
|
3,666
|
2,489
|
Provision for income
taxes
|
317
|
227
|
|
1,469
|
372
|
Net income
|
505
|
1,262
|
|
2,194
|
2,117
|
Net (income) loss
attributable to noncontrolling interest
|
51
|
(128)
|
|
(78)
|
(31)
|
Net income
attributable to controlling interest
|
$
556
|
$
1,134
|
|
$
2,119
|
$
2,086
|
|
|
|
|
|
|
Income per common
share:
|
|
|
|
|
|
Basic
|
$
0.10
|
$
0.20
|
|
$
0.38
|
$
0.38
|
Diluted
|
$
0.09
|
$
0.20
|
|
$
0.37
|
$
0.36
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,749
|
5,564
|
|
5,635
|
5,559
|
Diluted
|
5,869
|
5,777
|
|
5,747
|
5,723
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
505
|
$
1,262
|
|
$
2,197
|
$
2,117
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
|
Effect of foreign
currency translation adjustments
|
(92)
|
40
|
|
(103)
|
(96)
|
Total other
comprehensive income (loss), net of tax
|
(92)
|
40
|
|
(103)
|
(96)
|
Comprehensive
income
|
413
|
1,302
|
|
2,094
|
2,021
|
Comprehensive loss
(income) attributable to noncontrolling interest
|
51
|
(128)
|
|
(78)
|
(31)
|
Comprehensive income
attributable to controlling interest
|
$
464
|
$
1,174
|
|
$2,016
|
$
1,990
|
|
|
|
|
|
|
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SOURCE Appliance Recycling Centers of America