MINNEAPOLIS, Nov. 19, 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 third quarter ended October 3, 2015.
Revenues for the third quarter of 2015 were $28.1 million, down 15.3% compared with the same
period in 2014, as a result of decreased recycling division program
sales and lower byproduct revenues. Net loss for the third quarter
of 2015 was $(0.8) million, or
$(0.13) per diluted share, compared
with earnings of $0.3 million, or
$0.05 per diluted share, reported in
the third quarter of last year, due mainly to lower volumes under
certain appliance replacement programs and the significant drop in
scrap steel and other nonferrous metal prices in the markets in
which the company operates.
For the nine months ended October 3,
2015, total revenues decreased 13.4% to $85.8 million, compared with revenues of
$99.2 million for the same period in
the prior year. Overall, the company reported a net loss for the
nine months ended October 3, 2015, of
$(1.9) million, or $(0.32) per diluted share, compared with net
income of $1.4 million, or
$0.24 per diluted share, for the same
period in the prior year.
Third Quarter Highlights
During the third quarter of 2015, the company experienced:
- Decreases in energy efficiency program revenues from utilities,
municipalities and others by $2.3
million.
- Declines in byproduct revenues of $2.3
million as a result of the significant drop in the price of
scrap steel and other nonferrous metals.
- Overall decrease in selling, general and administrative
expenses of $0.3 million as a result
of cost reduction efforts in spite of a $0.3
million in spend related to professional fees associated
with the defense of our class action lawsuit.
"We continue to report declines in our financial results for the
third quarter as result of lower levels of activity within our
appliance recycling programs in fiscal 2015 and the impact the
strong U.S. dollar and weak demand has had on the price of
commodities we sell," commented Edward R.
(Jack) Cameron, President and Chief Executive Officer of
ARCA, Inc. Cameron commented further, "During the third
quarter the scrap steel industry witnessed a significant step
backwards in the selling price of scrap steel and nonferrous metal
prices. This has been precipitated by changes in demand in
Turkey and China and the strength of the U.S. dollar,
resulting in the reduction of U.S. exports of certain commodities
that we sell. We continue to work with our vendors and
customers to secure favorable pricing on the products that we sell
and to adjust the pricing of our services. We have been
working with a vendor to complete the destruction of refrigerants
that should yield approximately $1.6
million from our carbon offset programs in early 2016."
Retail Appliance Sales
ApplianceSmart, Inc., the company's retail division, posted
sales of $16.3 million for the third
quarter, a decrease of $0.4 million
when compared with the same period of 2014. ApplianceSmart reported
a $0.2 million operating loss for the
third quarter of 2015 as compared to an operating loss of
$0.6 million in the same period of
2014.
Brad Bremer, President of
ApplianceSmart, commented, "In the third quarter although our top
line sales declined slightly due to the highly competitive retail
landscape, our retail margins as a percentage of sales improved to
27.4% from 24.9% in the same period in 2014." Bremer
added "We continue to be encouraged by the growth of the LG
and Napoleon lines, which we launched earlier in the year.
This has brought some additional traffic into our stores and will
certainly strengthen our brand portfolio as LG and Napoleon
continue to be integrated into our sales mix. We have
recently signed an agreement to add Marvel to our
assortment, which will further enhance our mix and bring an
additional line of product for customers we currently are not
serving. The availability of out-of-carton product also
continues to be strong, and with that we expect additional
opportunities to improve our margins."
Recycling Revenues
ARCA Recycling, Inc. saw third quarter reductions in the
combination of appliance recycling fees and appliance replacement
revenues by $2.3 million to $9.5
million in the third quarter of 2015 when compared to the
third quarter of 2014. The decline from the prior year third
quarter results can be attributed to lower volumes on certain
utility energy efficiency programs. The Company believes the Clean
Power Plan (Section111(d) of the Clean Air Act) will increase the
demand for energy efficiency programs in the long term.
Cameron said, "We're very pleased with the success of our
appliance recycling programs and are happy to report that in
October 2015 we entered into a new
contract with our largest replacement program customer."
Byproduct Revenues
The Company's byproduct revenues decreased from $4.7 million in the third quarter of 2014 to
$2.3 million in the third quarter of
2015. The decline in byproduct revenues was the result of decreased
scrap steel and nonferrous metal pricing. Metal
prices experienced a significant drop during the first and
third quarters of 2015. Scrap steel selling prices have
fallen as much as $207 per ton in our largest market (or 56%)
at the end of the third quarter of 2015 when compared with the
prior year's average selling price. Nonferrous pricing has
seen dramatic declines as well. Lower pricing is
being driven by weak demand in steel intensive industries like oil
and gas production, a stronger dollar, and over-production of iron
ore and steel around the world.
ARCA's declines in byproduct revenues include decreases of
$0.7 million in commodities
sold. Revenues from the ARCA Advanced Processing, LLC ("AAP")
joint venture in Philadelphia also
reported a $1.3 million decline in
commodity revenues to $1.6 million,
compared with $2.9 million in the
third quarter of 2014. The decline was due primarily to decreased
scrap steel and nonferrous metal revenues for the same reasons
noted above.
Liquidity and Capital Resources
Cash and cash equivalents were $3.4
million as of October 3, 2015,
compared with $3.5 million as of
January 3, 2015. As of October 3, 2015, the Company had excess available
borrowing capacity under its revolving line of credit of
$1.9 million. Net working capital
decreased $4.0 million to
$5.6 million as of October 3, 2015. As a result of the loss in
the first quarter, ARCA reported to its bank that it was not in
compliance with the Company's revolving credit facility. The
credit facility is scheduled to expire in January 2016. ARCA
is working with its bank to enter into a replacement facility for
2016.
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)
|
|
|
October
3, 2015
|
January
3, 2015
|
ASSETS
|
(unaudited)
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
|
3,364
|
|
$
|
3,523
|
|
Accounts
receivable
|
11,773
|
|
10,954
|
|
Inventories
|
16,278
|
|
16,113
|
|
Income taxes
receivable
|
1,405
|
|
709
|
|
Other current
assets
|
905
|
|
1,096
|
|
Deferred income tax
assets
|
1,889
|
|
2,082
|
|
Total current
assets
|
35,614
|
|
34,477
|
|
Property and
equipment, net
|
11,125
|
|
11,761
|
|
Restricted
cash
|
500
|
|
-
|
|
Other
assets
|
708
|
|
708
|
|
Deferred income
taxes
|
3
|
|
14
|
|
Total assets
(a)
|
$
|
47,950
|
|
$
|
46,960
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
|
7,670
|
|
$
|
6,380
|
|
Accrued
expenses
|
7,561
|
|
8,133
|
|
Line of
credit
|
12,407
|
|
9,237
|
|
Current maturities of
long-term obligations
|
2,363
|
|
1,138
|
|
Total current
liabilities
|
30,001
|
|
24,888
|
|
Long-term
obligations, less current maturities
|
3,649
|
|
5,118
|
|
Other noncurrent
liabilities
|
270
|
|
369
|
|
Deferred income tax
liabilities
|
1,048
|
|
1,048
|
|
Total liabilities
(a)
|
34,968
|
|
31,423
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
Shareholders'
equity
|
11,821
|
|
13,602
|
|
Noncontrolling
interest
|
1,161
|
|
1,935
|
|
|
12,982
|
|
15,537
|
|
Total liabilities and
shareholders' equity
|
$
|
47,950
|
|
$
|
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 $9,027 and $9,814 as of October 3, 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 $2,454 and $2,338 as of October 3, 2015 and
January 3, 2015, respectively.
|
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In Thousands,
Except Per Share Amounts)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
October
3,
2015
|
September
27,
2014
|
|
October
3,
2015
|
September
27,
2014
|
Revenues:
|
|
|
|
|
|
Retail
|
$
|
16,253
|
|
$
|
16,712
|
|
|
$
|
50,845
|
|
$
|
50,774
|
|
Recycling
|
9,528
|
|
11,833
|
|
|
26,717
|
|
34,678
|
|
Byproduct
|
2,348
|
|
4,682
|
|
|
8,269
|
|
13,716
|
|
Total
revenues
|
28,129
|
|
33,227
|
|
|
85,831
|
|
99,168
|
|
|
|
|
|
|
|
Costs of
revenues
|
21,907
|
|
24,937
|
|
|
65,864
|
|
73,691
|
|
Gross
profit
|
6,222
|
|
8,290
|
|
|
19,967
|
|
25,477
|
|
Selling, general and
administrative expenses
|
7,330
|
|
7,612
|
|
|
22,453
|
|
22,283
|
|
Operating income
(loss)
|
(1,108)
|
|
678
|
|
|
(2,486)
|
|
3,194
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest
expense, net
|
(312)
|
|
(219)
|
|
|
(878)
|
|
(708)
|
|
Other income
(expense), net
|
(34)
|
|
(67)
|
|
|
(175)
|
|
(55)
|
|
Income (loss) before
income taxes and noncontrolling interest
|
(1,454)
|
|
392
|
|
|
(3,539)
|
|
2,431
|
|
Provision for
(benefit from) income taxes
|
(308)
|
|
145
|
|
|
(894)
|
|
976
|
|
Net income
(loss)
|
(1,146)
|
|
247
|
|
|
(2,645)
|
|
1,455
|
|
Net loss (income)
attributable to noncontrolling interest
|
373
|
|
51
|
|
|
774
|
|
(78)
|
|
Net income (loss)
attributable to controlling interest
|
$
|
(773)
|
|
$
|
298
|
|
|
$
|
(1,871)
|
|
$
|
1,377
|
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
|
(0.13)
|
|
$
|
0.05
|
|
|
$
|
(0.32)
|
|
$
|
0.24
|
|
Diluted
|
$
|
(0.13)
|
|
$
|
0.05
|
|
|
$
|
(0.32)
|
|
$
|
0.24
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
5,836
|
|
5,749
|
|
|
5,811
|
|
5,635
|
|
Diluted
|
5,836
|
|
5,869
|
|
|
5,811
|
|
5,747
|
|
|
|
|
|
|
|
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SOURCE Appliance Recycling Centers of America, Inc.