MINNEAPOLIS, May 26, 2015 /PRNewswire/ -- Appliance Recycling
Centers of America, Inc. (NASDAQ: ARCI), a leading provider of
appliance recycling and retailing services, today reported
operating results for the first quarter ended April 4, 2015.
Revenues for the first quarter of 2015 were $27.5 million, down 16.8% compared with the same
period in 2014, as a result of decreased recycling division
appliance replacement sales and lower carbon offset revenue. Net
loss for the first quarter of 2015 was $1.7
million, or $(0.29) per
diluted share, compared with earnings of $0.7 million, or $0.12 per diluted share, reported in the first
quarter of last year, due mainly to the decrease in recycling
division revenues, impacted by delays in the deliveries under one
of our largest appliance replacement programs, and declining
byproduct revenues resulting from the significant drop in steel and
other nonferrous metal selling prices in the markets that we
operate.
First Quarter Highlights
During the first quarter of 2015, the company:
- Experienced declines in appliance replacement revenues to
utilities, municipalities and others by $4.4
million, or 45%.
- Due to the timing of carbon offset revenues, we experience a
decline in byproduct revenues of $0.8
million. Further declines in byproduct revenues of
$1.4 million were the result of the
significant drop in the price of scrap steel and other non-ferrous
metal that we sell.
"We reported declines in our financial results for the first
quarter, as result of delays that were outside of our control in
our appliance replacement program deliveries in fiscal 2015 and the
impact that the strong US dollar has had on the price of steel and
other non-ferrous metals that we sell," commented Edward R. (Jack) Cameron, president and chief
executive officer of ARCA, Inc. Jack commented further,
"Although the recovery of scrap steel and non-ferrous metal prices
appears to be a slow one we are hopeful that the markets will
return to levels at which we are profitable. Further, the
delays encountered in our largest appliance replacement program
have been resolved and we are now returning to higher delivery
levels. Finally, we received approximately $0.6 million in carbon offset revenues in the
second quarter of 2015 and plan to participate in further carbon
offset programs with the refrigerants that we have accumulated for
responsible destruction."
Retail Appliance Sales
ApplianceSmart, Inc., the company's retail division, posted
sales of $17.1 million for the first
quarter, an increase of $0.5 million,
or 3%, compared with the same period of 2014. The increase was due
mainly to increases in same-store sales and successful holiday
weekend sales events during the quarter. ApplianceSmart reported an
operating loss for the first quarter of $0.6
million, compared with an operating income of $0.1 million in the same period of the prior
year.
Brad Bremer, president of
ApplianceSmart, commented, "We have been successful at growing our
top line this quarter, however results were impacted by lower
margins in the highly competitive retail landscape."
Brad added, "We continue to see top line sales growth
in the second quarter of fiscal 2015 and slight margin
improvement. We have added LG and Napoleon Grills as new suppliers to our already
strong portfolio and will be rolling out these lines in the second
quarter to all of our retail locations. We have received
additional support from our vendors and have negotiated better
terms. The availability of out of carton product also
continues to improve and with that we expect additional
opportunities to improve our margins. We have also reviewed
our retail space requirements and continue to downsize our larger
locations where appropriate."
Recycling Revenues
ARCA Recycling, Inc. saw reductions in the combination of
appliance recycling fees and appliance replacement revenues by
$3.9 million to $7.8 million in the
first quarter of 2015. Appliance replacement revenues
decreased $4.4 million, while
appliance recycling fees increased $0.5
million. Appliance replacement units in the first quarter of
2015 decreased mainly as a result of delays in deliveries under one
of our largest utility replacement programs. The company's
recycling only program revenues increased by 28.4% during the first
quarter of 2015. A combination of new programs and higher
volumes with existing customer programs contributed to this
increase.
Jack Cameron said, "We're very
pleased with the success of our appliance recycling programs and
are happy to report that in May 2015
deliveries have returned to historically more normal levels on our
largest replacement program." He added, "Appliance replacement
contracts typically range between one and two years. During the
first quarter, we were pleased that one large utility customer
extended their appliance replacement contract, to year end based
upon funding availability."
Byproduct Revenues
The company's byproduct revenues, decreased from $4.8 million in the first quarter of 2014 to
$2.6 million in the first fiscal
quarter of 2015. The decline in ARCA byproduct revenues was
primarily due to the lack of carbon offset revenues in the first
quarter of fiscal 2015 a decline of $0.7
million when compared with the first quarter of fiscal
2014. Further ARCA declines in revenues of $0.5 million in fiscal 2015 were due to decreased
steel and non-ferrous metal pricing. Metal prices have
experienced a significant drop during the first quarter of 2015.
Steel selling prices have fallen as much as $185 per ton
(or 44%) vs. prior year's first quarter peak. Non
Ferrous pricing saw dramatic declines too. Lower
pricing is being driven by weak demand in steel intensive
industries like oil and gas production, a stronger dollar, and
over production of both iron ore and steel
from producer countries around the world.
Revenues from the AAP joint venture in Philadelphia, reported in byproduct revenues,
decreased $1.0 million to
$1.8 million, compared with
$2.8 million in the first quarter of
2014. The decline was due primarily to decreased steel and
nonferrous metal revenues for the same reasons noted above.
Liquidity and Capital Resources
Cash and cash equivalents were $3.6
million as of April 4, 2015,
compared with $3.5 million as of
January 3, 2015. As of April 4, 2015, the company had excess available
borrowing capacity under its revolving line of credit of
$4.8 million. Net working capital
decreased $2.9 million to
$6.7 million as of April 4, 2015. As a result of the loss in
the first quarter we reported to our bank that we were not in
compliance with our revolving credit facility. We are working
with our bank to obtain a waiver for our covenant non-compliance
and until we receive such waiver, have reclassified our
$1.4 million term note to current
liabilities.
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)
|
|
|
April
4,
2015
|
January
3,
2015
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$ 3,558
|
$
3,523
|
Accounts
receivable
|
9,417
|
10,954
|
Inventories
|
16,045
|
16,113
|
Income taxes
receivable
|
1,180
|
709
|
Other current
assets
|
914
|
1,096
|
Deferred income tax
assets
|
2,086
|
2,082
|
Total current
assets
|
33,200
|
34,477
|
Property and
equipment, net
|
11,533
|
11,761
|
Other
assets
|
657
|
708
|
Deferred income tax
assets
|
14
|
14
|
Total assets
(a)
|
$ 45,404
|
$
46,960
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$ 8,054
|
$
6,380
|
Accrued
expenses
|
7,819
|
8,133
|
Line of
credit
|
8,270
|
9,237
|
Current maturities of
long-term obligations
|
2,317
|
1,138
|
Total current
liabilities
|
26,460
|
24,488
|
|
|
|
Long-term obligations,
less current maturities
|
4,044
|
5,118
|
Other noncurrent
liabilities
|
331
|
369
|
Deferred income tax
liabilities
|
1,048
|
1,048
|
Total liabilities
(a)
|
31,883
|
31,423
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
Common
Stock
|
21,224
|
21,137
|
Accumulated deficit
|
(8,560)
|
(6,860)
|
Accumulated other
comprehensive loss
|
(793)
|
(675)
|
Total shareholders'
equity
|
11,871
|
13,602
|
Noncontrolling
interest
|
1,650
|
1,935
|
|
13,521
|
15,537
|
Total liabilities and
shareholders' equity
|
$ 45,404
|
$
46,960
|
(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 $9,464 and $9,814 as of April 4, 2015, and January 3,
2015, respectively. Liabilities of AAP for which creditors do not
have recourse to the general credit of Appliance Recycling Centers
of America, Inc. were $2,633 and $2,338 as of April 4, 2015, and
January 3, 2015, respectively.
|
|
|
|
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
(In Thousands,
Except Per Share Amounts)
|
|
|
|
April
4,
2015
|
March
29,
2014
|
Revenues:
|
|
|
Retail
|
$ 17,098
|
$ 16,601
|
Recycling
|
7,823
|
11,684
|
Byproduct
|
2,617
|
4,823
|
Total
revenues
|
27,538
|
33,108
|
Costs of
revenues
|
21,670
|
24,047
|
Gross
profit
|
5,868
|
9,061
|
Selling, general and
administrative expenses
|
7,868
|
7,375
|
Operating income
(loss)
|
(2,000)
|
1,686
|
|
|
|
Other
expense:
|
|
|
Interest
expense, net
|
(321)
|
(261)
|
Other
expense, net
|
(149)
|
(31)
|
Income (loss) before
income taxes and noncontrolling interest
|
(2,470)
|
1,394
|
Provision for
(benefit from) income taxes
|
(485)
|
529
|
Net income
(loss)
|
(1,985)
|
865
|
Net loss (income)
attributable to noncontrolling interest
|
285
|
(137)
|
Net income (loss)
attributable to controlling interest
|
$ (1,700)
|
$
728
|
|
|
|
Income (loss) per
common share:
|
|
|
Basic
|
$ (0.29)
|
$
0.13
|
Diluted
|
$ (0.29)
|
$
0.12
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
Basic
|
5,795
|
5,577
|
Diluted
|
5,795
|
5,852
|
|
|
|
|
|
|
Net income
(loss)
|
$ (1,985)
|
$
865
|
Other comprehensive
loss, net of tax:
|
|
|
Effect of foreign
currency translation adjustments
|
(118)
|
(96)
|
Total other
comprehensive loss, net of tax
|
(118)
|
(96)
|
Comprehensive income
(loss)
|
(2,103)
|
769
|
Comprehensive loss
(income) attributable to noncontrolling interest
|
285
|
(137)
|
Comprehensive income
(loss) attributable to controlling interest
|
$ (1,818)
|
$
632
|
|
|
|
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SOURCE Appliance Recycling Centers of America, Inc.