MINNEAPOLIS, Nov. 4, 2013 /PRNewswire/ -- Appliance Recycling
Centers of America, Inc. (Nasdaq: ARCI), a leading provider of
appliance retailing and recycling services, today announced
financial results for its third quarter ended September 28, 2013. Revenues for the quarter were
$33.5 million, up 17% over last year
due mainly to increased appliance replacement program activity for
energy efficiency programs. During the quarter, one client
accelerated its 2014 appliance replacement program into 2013,
adding $3.8 million to third quarter
revenues. Net earnings for the third quarter were $1.1 million, or $0.20 per diluted share, compared with a net loss
of $1.1 million, or $0.19 per diluted share, reported during the same
period last year.
Improved third quarter earnings were mainly the result of the
increased appliance replacement program revenues generated in the
Company's appliance recycling business unit, improved performance
in the ARCA Advanced Processing (AAP) appliance recycling joint
venture, and reduced retail store operating expenses and
advertising.
For the nine months ended September 28,
2013, total revenues increased 10% to $96.2 million, compared with revenues of
$87.7 million for the same period in
the prior year. Overall, the Company reported year-to-date net
income of $2.1 million, or
$0.36 per diluted share, compared
with a net loss of $1.8 million, or
$0.32 per diluted share, in the
nine-month period ended September 29,
2012.
Third Quarter Highlights
- The Company renegotiated its line of credit agreement with PNC
Bank, lowering its interest rate.
- The Company announced a plan to relocate its recycling
business-related customer service function from California to Minnesota by December
1, recording a $30,000
restructuring charge accordingly.
- After the third quarter ended, the Company and AAP collectively
received $0.5 million in cash related
to the issuance and sale of carbon offsets in the California
Cap-and-Trade Program, which will favorably impact the fourth
quarter pre-tax earnings by the same amount.
"We're pleased with our third quarter results, especially
considering the significant operational and financial challenges we
faced the past year," commented Edward R.
(Jack) Cameron, president and chief executive officer of
ARCA, Inc. "At the same time, we remain cautious since our business
relies significantly on winning contracts, fluctuating market
prices for materials recovered in our appliance recycling efforts,
and a highly competitive retail appliance market."
Retail Appliance Sales
ApplianceSmart sales of $17.0
million for the third quarter declined $0.3 million, or 2%, compared with the same
period of 2012. The decline was due mainly to the effect of store
closures. Same-store sales increased $0.8
million or 5%. The combination of a 100-basis-point
improvement in gross margin and lower operating expenses improved
operating income by $0.8 million
compared with the third quarter of 2012.
Brad Bremer, president of
ApplianceSmart, commented, "Competition from national chains such
as The Home Depot, Lowes and others remains strong. At the same
time, consumer purchasing behavior is affected by lingering
uncertainty about the economy and governmental policy." Bremer
added, "Despite these factors, I'm pleased we grew ApplianceSmart's
profitability this quarter through the same store sales increase,
lower store operating costs and a better product mix."
Recycling Revenues
Recycling revenues, which consist of appliance recycling fees
and appliance replacement revenues, increased $4.8 million, or 68%, to $11.8 million in the third quarter of 2013.
Appliance replacement revenues increased $5.2 million, while appliance recycling fees
declined $0.4 million. Sales of
appliance replacement units in the third quarter of 2013
approximately tripled from the same period last year, due mainly to
one utility's desire to accelerate appliance installations
into its 2013 program year.
Mark Eisenschenk, president of
ARCA Recycling, Inc. and chief operating officer of ARCA, said,
"ApplianceSmart's manufacturer relationships and product
familiarity enable us to offer responsive, cost-effective solutions
for appliance replacement programs." He added, "It's noteworthy
that appliance replacement program revenues, which were significant
to the third quarter's revenue and earnings, are not predictable.
However, we are confident in our ability to competitively bid on
new replacement programs and maintain current programs as integral
elements of our business strategy moving forward."
Byproduct Revenues
The Company's byproduct revenues, excluding AAP, remained flat
at $1.4 million compared with the
third quarter of 2012. The Company's overall increase in recycling
volumes was offset by a 16% decline in scrap metal revenues per
unit compared to the third quarter of 2012.
Revenues from the AAP joint venture in Philadelphia, reported in byproduct revenues,
increased $0.6 million, or 20%, to
$3.0 million, compared with
$2.5 million in the third quarter of
2012. The improvement was due mainly to higher scrap volumes. AAP's
gross margin improved to 27% compared with 5% in the same period of
2012 as a result of a reduction in the cost of appliance purchases
under contract and increased labor efficiencies. AAP's operating
income for the third quarter was $331,000 compared with an operating loss of
$311,000 during the same period of
2012. The improvements in gross margin and operating income were
primarily the result of higher volumes and lower acquisition costs
per gross ton of recyclable appliances compared with the third
quarter of 2012, partially offset by higher maintenance and
depreciation expense related to the material recovery systems.
Liquidity and Capital Resources
Cash and cash equivalents were $2.1
million as of September 28,
2013, compared with $3.2
million as of December 29,
2012. As of September 28,
2013, the Company had excess available borrowing capacity
under its revolving line of credit of $6.8
million compared with $2.5
million as of December 29,
2012. Net working capital of $8.9
million increased $1.3 million
as of September 28, 2013, compared
with net working capital of $7.6
million as of December 29,
2012, 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, November 5, 2013, at 10:00
a.m. CST. To participate in the conference call, please dial
the following number ten minutes prior to the scheduled time:
800-406-5162. 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)
|
|
|
September
28,
2013
|
December
29,
2012
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
2,131
|
$
3,174
|
Accounts receivable,
net of allowance of $10 and $8, respectively
|
10,796
|
6,256
|
Inventories, net of
reserves of $149 and $682, respectively
|
15,249
|
17,274
|
Income taxes
receivable
|
263
|
522
|
Other current
assets
|
1,473
|
1,332
|
Total current
assets
|
29,912
|
28,558
|
Property and
equipment, net
|
11,686
|
12,248
|
Restricted
cash
|
500
|
–
|
Other
assets
|
976
|
973
|
Deferred income
taxes
|
24
|
25
|
Total assets
(a)
|
$
43,098
|
$
41,804
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
7,277
|
$
4,957
|
Accrued
expenses
|
5,328
|
4,310
|
Line of
credit
|
6,823
|
10,559
|
Current maturities of
long-term obligations
|
1,217
|
955
|
Income taxes
payable
|
229
|
–
|
Deferred income tax
liabilities
|
146
|
146
|
Total current
liabilities
|
21,020
|
20,927
|
|
|
|
Long-term
obligations, less current maturities
|
5,706
|
6,357
|
Deferred gain, net of
current portion
|
-
|
365
|
Deferred income tax
liabilities
|
921
|
921
|
Total liabilities
(a)
|
27,647
|
28,570
|
|
|
|
Commitments and
contingencies
|
–
|
–
|
|
|
|
Shareholders'
equity:
|
|
|
Common Stock, no par
value; 10,000 shares authorized; issued and outstanding: 5,571
shares and 5,556 shares, respectively
|
20,773
|
20,577
|
Accumulated
deficit
|
(6,563)
|
(8,649)
|
Accumulated other
comprehensive loss
|
(386)
|
(290)
|
Total shareholders'
equity
|
13,824
|
11,638
|
Noncontrolling
interest
|
1,627
|
1,596
|
|
15,451
|
13,234
|
Total liabilities and
shareholders' equity
|
$
43,098
|
$
41,804
|
|
(a)
|
Assets of ARCA
Advanced Processing, LLC (AAP), ARCA's consolidated variable
interest entity (VIE), which can only be used to settle obligations
of AAP were $9,856 and $10,045 as of September 28, 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 $2,140 and $1,948 as of
September 28, 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
|
|
Nine Months
Ended
|
|
September
28,
2013
|
September
29,
2012
|
|
September
28,
2013
|
September
29,
2012
|
Revenues:
|
|
|
|
|
|
Retail
|
$
17,018
|
$
17,286
|
|
$
52,878
|
$
56,006
|
Recycling
|
11,823
|
7,025
|
|
30,383
|
18,435
|
Byproduct
|
4,697
|
4,417
|
|
12,974
|
13,274
|
Total
revenues
|
33,538
|
28,728
|
|
96,235
|
87,715
|
|
|
|
|
|
|
Costs of
revenues
|
24,445
|
21,634
|
|
70,737
|
64,740
|
Gross
profit
|
9,093
|
7,094
|
|
25,498
|
22,975
|
Selling, general and
administrative expenses
|
7,291
|
7,828
|
|
22,071
|
23,818
|
Operating income
(loss)
|
1,802
|
(734)
|
|
3,427
|
(843)
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest
expense, net
|
(320)
|
(299)
|
|
(925)
|
(832)
|
Other
income (expense), net
|
7
|
(13)
|
|
(13)
|
(22)
|
Income (loss) before
income taxes and noncontrolling interest
|
1,489
|
(1,046)
|
|
2,489
|
(1,697)
|
Provision for income
taxes
|
227
|
113
|
|
372
|
90
|
Net income
(loss)
|
1,262
|
(1,159)
|
|
2,117
|
(1,787)
|
Net (income) loss
attributable to noncontrolling interest
|
(128)
|
77
|
|
(31)
|
(2)
|
Net income (loss)
attributable to controlling interest
|
$
1,134
|
$
(1,082)
|
|
$
2,086
|
$
(1,789)
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
0.20
|
$
(0.19)
|
|
$
0.38
|
$
(0.32)
|
Diluted
|
$
0.20
|
$
(0.19)
|
|
$
0.36
|
$
(0.32)
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,564
|
5,556
|
|
5,559
|
5,549
|
Diluted
|
5,777
|
5,556
|
|
5,723
|
5,549
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
1,262
|
$
(1,159)
|
|
$
2,117
|
$
(1,787)
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
|
Effect of foreign
currency translation adjustments
|
40
|
120
|
|
(96)
|
109
|
Total other
comprehensive income (loss), net of tax
|
40
|
120
|
|
(96)
|
109
|
Comprehensive income
(loss)
|
1,302
|
(1,039)
|
|
2,021
|
(1,678)
|
Comprehensive loss
(income) attributable to noncontrolling interest
|
(128)
|
77
|
|
(31)
|
(2)
|
Comprehensive income
(loss) attributable to controlling interest
|
$1,174
|
$
(962)
|
|
$
1,990
|
$
(1,680)
|
|
|
|
|
|
|
SOURCE Appliance Recycling Centers of America, Inc.