MINNEAPOLIS, Nov. 9 /PRNewswire-FirstCall/ -- Appliance Recycling
Centers of America, Inc. (NASDAQ:ARCI) today reported operating
results for the third quarter ended October 3, 2009. Highlights of
the third quarter included: -- Return to profitability in tight
economic conditions. -- Sale-leaseback of St. Louis Park facility
providing $2.0 million cash. -- Closing of one underperforming
ApplianceSmart Factory Outlet and non-renewal of one retail lease.
-- Entered into a recycling agreement with General Electric in
October 2009. Total revenues for the third quarter of 2009
decreased 11.6% to $26.0 million from $29.4 million in the third
quarter of 2008. ARCA reported third quarter 2009 operating income
of $0.9 million compared to $2.1 million during the same period of
2008. Third quarter 2009 comparable store revenues from the
ApplianceSmart Factory Outlets open for the past twelve months
decreased 12.3%, and total retail revenues decreased 4.1% to $18.0
million from $18.7 million during the same period of 2008. The
decline in comparable store revenues was due primarily to price
compression on product to remain competitive with other retailers
in the current economic environment, along with lower levels of
customer traffic. Recycling revenues decreased 20.0% to $7.0
million in the third quarter of 2009 compared to revenues of $8.8
million in the same period of 2008. The decrease in recycling
revenues compared to the third quarter of 2008 was primarily the
result of a planned volume reduction for one contract in
California. Byproduct revenues decreased 46.3% to $1.0 million in
the third quarter of 2009 compared to revenues of $1.9 million in
the third quarter of 2008. The decrease in byproduct revenues was
primarily the result of lower volumes and lower scrap metal prices
compared to the third quarter of 2008. Overall gross profit as a
percentage of total revenues declined to 32.7% for the third
quarter of 2009 compared to 34.5% for the third quarter of 2008.
Gross profit for the retail segment was 28.4% in the third quarter
of 2009 compared to 30.1% in the same quarter of 2008. The
year-over-year decline is related primarily to the price
compression mentioned previously and to lower comparable store
sales. Gross profit for the recycling segment was 42.5% for the
third quarter of 2009 compared to 42.6% for the same quarter of
2008. Selling expenses increased $0.1 million to $5.1 million or
19.6% of total revenues in the third quarter of 2009 compared to
$5.0 million or 16.9% of total revenues for the third quarter of
2008. The increase in selling expenses was due primarily to
additional occupancy costs from operating more factory outlet
stores and was partially offset by cost containment initiatives.
General and administrative expenses for the third quarter decreased
$0.5 million to $2.6 million or 9.8% of total revenues in the third
quarter of 2009 compared to $3.1 million or 10.4% of total revenues
for the third quarter of 2008. The decrease in general and
administrative expenses was due primarily to cost containment
initiatives implemented in the second quarter of 2009. The Company
recorded a tax provision of $0.2 million for the third quarter of
2009 related primarily to taxable income generated from its
Canadian operations. The Company's net income for the third quarter
was $0.4 million or $0.09 per diluted share compared to $1.1
million or $0.25 per diluted share for the third quarter of 2008.
Net income for the third quarter of 2009 included non-cash
share-based compensation expense of $0.2 million and was consistent
with the non-cash share-based compensation expense in the third
quarter of 2008. Year-to-Date Total revenues through three quarters
of 2009 declined 8.5% to $77.6 million compared to $84.8 million
for the same period of 2008. This overall decrease is the effect of
a 0.6% decrease in retail revenues and a 26.3% decrease in
recycling and byproduct revenues combined. Year-to-date comparable
retail store revenues decreased 13.9% but were offset by the
revenues from stores that opened during the past year. Recycling
and byproduct revenues combined decreased $6.9 million primarily as
a result of lower recycling volumes and lower scrap metal prices in
the Company's California market combined with this year's
later-than-anticipated start of a major utility's annual appliance
replacement program. Overall gross profit through three quarters of
2009 as a percentage of total revenues was 28.9% compared to 32.9%
for the comparable period of 2008. The decline was due primarily to
price compression on product in the Company's retail segment to
remain competitive during the current economic downturn. Gross
profit through three quarters of 2009 in the retail segment was
26.8% compared to 32.7% in the same period of 2008. Gross profit
through three quarters of 2009 in the recycling segment was 35.4%
compared to 33.3% for the same period of 2008. The increase in
gross profit for recycling was due primarily to cost-saving efforts
in several areas, including labor and transportation. Selling
expenses increased $1.2 million to $16.0 million or 20.7% of total
revenues through three quarters of 2009 compared to $14.8 million
or 17.5% of total revenues for the comparable period of 2008. The
increase in selling expenses was due primarily to additional
occupancy costs from operating more factory outlet stores. General
and administrative expenses through three quarters of 2009
decreased $1.4 million to $7.3 million or 9.5% of total revenues
compared to $8.7 million or 10.3% of total revenues for the
comparable period of 2008. The decrease in general and
administrative expenses was due primarily to cost containment
initiatives previously mentioned. The Company's net loss through
three quarters of 2009 was $2.0 million or $0.43 per diluted share
compared to net income of $2.1 million or $0.45 per diluted share
for the comparable period of 2008. The net loss through three
quarters of 2009 included non-cash share-based compensation expense
of $0.4 million and was consistent with the non-cash share-based
compensation expense for the same period of 2008. Sale-Leaseback
Transaction On September 25, 2009, the Company completed the
sale-leaseback of its St. Louis Park building. The building is a
126,000-square-foot facility that includes the Company's corporate
office, a processing and recycling center, and an ApplianceSmart
Factory Outlet store. Pursuant to the agreement entered into on
August 11, 2009, the Company sold its St. Louis Park building for
$4.7 million in cash and leased the building back over an initial
lease term of five years. The sale of the building provided the
Company with $2.0 million in cash after the repayment of the
mortgage. The sale-leaseback transaction also resulted in a $2.4
million deferred gain that will be recognized on a straight-line
basis over the initial lease term of the building. ApplianceSmart
Factory Outlets In mid November, the Company plans to open a
27,900-square-foot ApplianceSmart Factory Outlet in Cumming,
Georgia, to serve the northeast suburbs of the Atlanta metropolitan
area. In the third quarter, the Company closed one underperforming
ApplianceSmart Factory Outlet in the Atlanta market and one store
in San Antonio when the facility lease expired. Through eight
months of operation in 2009, these two stores combined generated
$3.2 million in retail revenues and reported an operating loss of
$0.3 million. Appliance Sales and Recycling Agreement with GE On
October 21, 2009, the Company entered into an agreement with
General Electric Company (GE) acting through its GE Consumer &
Industrial business component. Under the Agreement, GE will sell
all of its recyclable appliances generated in the northeastern
United States to the Company, and the Company will collect, process
and recycle such recyclable appliances. The Agreement requires that
the Company will only recycle, and will not sell for re-use or
resale the recyclable appliances purchased from GE. The Company
will establish a regional processing center located in the
northeastern United States at which the recyclable appliances will
be processed. Edward R. (Jack) Cameron, President and Chief
Executive Officer, commented: "We're encouraged that the third
quarter of 2009 reflected improvement in our overall business
compared to the second quarter of this year. Our ApplianceSmart
Factory Outlets performed relatively well in the Minnesota and Ohio
markets, although the Georgia and Texas markets have continued to
be very challenging. Our retail store gross profit margins remained
flat from the second quarter 2009 to third quarter 2009. However,
we did see significant improvement in our recycling margins between
the second and third quarters due to cost containment initiatives
and operating efficiencies." Cameron added: "We are seeing the
positive effects of the multiple initiatives we have implemented
throughout the Company to reduce costs at our operating and
corporate levels. As a result of these measures, we realized an
increase in our recycling segment margins along with a decrease in
corporate overhead during the third quarter." About ARCA ARCA
(http://www.arcainc.com/) is one of the nation's largest recyclers
of major household appliances for the energy conservation programs
of electric utilities. The Company 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. Through its
ApplianceSmart operation (http://www.appliancesmart.com/), ARCA
also is one of the nation's leading retailers of special-buy
household appliances, primarily those manufactured by Maytag, GE,
Frigidaire and Whirlpool. These special-buy appliances, which
include close-outs, factory overruns and scratch-and-dent units,
typically are not integrated into the manufacturer's normal
distribution channel. ApplianceSmart sells these new appliances at
a discount to full retail, offers a 100% money-back guarantee and
provides warranties on parts and labor. As of November 2009,
ApplianceSmart was operating 18 factory outlets: six in the
Minneapolis/St. Paul market; one in the Rochester, Minn., market;
four in the Columbus, Ohio, market; five in the Atlanta market; and
two in San Antonio, Texas. In mid November, the Company plans to
open its nineteenth factory outlet in Cumming, Georgia. 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.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands,
Except Per Share Amounts) Three Months Ended Nine Months Ended
October September October September 3, 27, 3, 27, 2009 2008 2009
2008 ---- ---- ---- ---- Revenues: Retail $17,962 $18,724 $58,229
$58,558 Recycling 7,006 8,759 16,942 21,991 Byproduct 1,037 1,931
2,384 4,229 ----- ----- ----- ----- Total revenues 26,005 29,414
77,555 84,778 Costs of revenues 17,512 19,252 55,148 56,909 ------
------ ------ ------ Gross profit 8,493 10,162 22,407 27,869
Selling, general and administrative expenses 7,638 8,017 23,378
23,577 ----- ----- ------ ------ Operating income (loss) 855 2,145
(971) 4,292 Other income (expense): Interest expense, net (325)
(316) (900) (1,040) Other expenses, net 36 8 (35) 8 -- --- --- ---
Income (loss) from continuing operations before income taxes 566
1,837 (1,906) 3,260 Provision for income taxes 150 560 51 736 ---
--- -- --- Income (loss) from continuing operations 416 1,277
(1,957) 2,524 Loss from discontinued operations, net of tax - (136)
- (429) --- ---- --- ---- Net income (loss) $416 $1,141 $(1,957)
$2,095 ==== ====== ======= ====== Basic income (loss) per share:
Continuing operations $0.09 $0.28 $(0.43) $0.55 Discontinued
operations - (0.03) - (0.09) --- ----- --- ----- Net income (loss)
$0.09 $0.25 $(0.43) $0.46 ===== ===== ====== ===== Diluted income
(loss) per share: Continuing operations $0.09 $0.28 $(0.43) $0.54
Discontinued operations - (0.03) - (0.09) --- ----- --- ----- Net
income (loss) $0.09 $0.25 $(0.43) $0.45 ===== ===== ====== =====
Weighted average number of shares outstanding: Basic 4,578 4,578
4,578 4,568 ===== ===== ===== ===== Diluted 4,578 4,608 4,578 4,622
===== ===== ===== ===== APPLIANCE RECYCLING CENTERS OF AMERICA,
INC. CONSOLIDATED BALANCE SHEETS (In Thousands) October 3, January
3, 2009 2009 ---- ---- (unaudited) Assets Current assets: Cash and
cash equivalents $2,707 $3,498 Accounts receivable, net of
allowance of $39 and $292, respectively 5,589 6,056 Inventories,
net of reserves of $360 and $115, respectively 17,979 18,834 Other
current assets 687 950 Deferred income taxes 448 448 --- --- Total
current assets 27,410 29,786 Property and equipment, net 4,321
6,967 Deferred income taxes 199 177 Restricted cash 700 - Other
assets 753 485 --- --- Total assets $33,383 $37,415 ======= =======
Liabilities and Shareholders' Equity Current liabilities: Accounts
payable $4,933 $4,473 Checks issued in excess of bank balance 516 -
Accrued expenses 4,602 4,073 Line of credit 11,539 14,527 Current
maturities of long-term obligations 532 579 Income taxes payable
149 362 --- --- Total current liabilities 22,271 24,014 Long-term
obligations, less current maturities 2,067 4,892 Deferred gain
1,953 - Deferred income tax liabilities 529 520 --- --- Total
liabilities 26,820 29,426 ------ ------ Commitments and
contingencies - - Shareholders' equity: Common Stock, no par value;
10,000 shares authorized; issued and outstanding: 4,578 shares
16,666 16,221 Accumulated deficit (9,886) (7,929) Accumulated other
comprehensive loss (217) (303) ---- ---- Total shareholders' equity
6,563 7,989 ----- ----- Total liabilities and shareholders' equity
$33,383 $37,415 ======= ======= DATASOURCE: Appliance Recycling
Centers of America, Inc. CONTACT: Appliance Recycling Centers of
America, Inc., +1-952-930-9000 Web Site: http://www.arcainc.com/
http://www.appliancesmart.com/
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