EXHIBIT 99.1
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Appliance Recycling Centers of America, Inc. |
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For Immediate Release |
For Additional Information |
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Edward R. (Jack) Cameron (CEO) |
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(952) 930-9000 |
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Richard G. Cinquina |
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Equity Market Partners |
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(904) 415-1415 |
Appliance Recycling Centers of America Reports First Quarter Results
Minneapolis, MN—May 8, 2007—Appliance Recycling Centers of America, Inc. (ARCA) (Nasdaq: ARCI) today reported sales of $19,932,000 for the first quarter of 2007 ended March 31, an increase of 11% from $17,916,000 for the first quarter of 2006. ARCA reported a net loss of $472,000 or $0.11 per share, an improvement from the net loss of $678,000 or $0.16 per share in the first quarter of 2006.
Same-store sales of the 13 ApplianceSmart factory outlets that were open during the complete first quarters of 2007 and 2006 increased 3%, while total retail sales rose 12% in the first quarter to $17,689,000 from $15,837,000 from the first quarter of 2006. First quarter recycling revenues increased 7% to $1,894,000 from $1,763,000 in the comparable period of 2006.
Edward R. (Jack) Cameron, president and chief executive officer, commented: “The first quarter is typically the seasonally slowest period of any given year for appliance sales and recycling. However, both of our operations started strengthening during the latter stages of the quarter, enabling ARCA to report double-digit revenue growth and a significantly lower net loss in comparison to last year’s first quarter. The more than $200,000 reduction in our net loss was achieved despite increased operating expenses stemming from the start-up costs of our fifteenth ApplianceSmart factory outlet in suburban Atlanta and the operation of two additional ApplianceSmart outlets in comparison to the first quarter of 2006. We believe our cost structure
and overall efficiencies are benefiting from initiatives that we have taken over the past year to strengthen ApplianceSmart’s inventory management and other business systems. In addition, we have worked hard to attain more favorable pricing from our appliance manufacturing partners.”
As recently reported, ARCA’s recycling contract with the Southern California Public Power Authority (SCPPA) has been expanded to include the Los Angeles Department of Water and Power, for whom ARCA will replace and recycle 50,000 old, inefficient refrigerators owned by low income residents in the city. This program, which commenced April 30, is expected to generate revenues for ARCA of approximately $25 million over the next 12 months.
During the first quarter, ARCA incurred legal costs of $36,000 related to two previously reported lawsuits involving JACO Environmental, Inc. In one lawsuit, ARCA has charged JACO with engaging in unfair business practices in violation of federal and California laws by committing fraud on the U.S. Patent Office in order to obtain a patent for a refrigerator recycling method that was previously developed by ARCA. This litigation is expected to go to trial later this year. In addition, JACO and SEG Umwelt-Service/Basis of Mettlach, Germany (SEG) have filed a patent infringement lawsuit against ARCA, claiming that ARCA has been using refrigerator recycling systems and processes invented by SEG and protected by two U.S. patents issued to SEG and exclusively licensed to JACO. ARCA believes this lawsuit is without merit and is vigorously defending itself. Legal expenses related to these actions are expected to increase in coming quarters.
Cameron added: “We believe the second quarter outlook for our ApplianceSmart operation is positive, but we remain cautious about the potential impact of high gas prices and weakness in the housing sector and general economy. In addition, we are optimistic about the prospects of our appliance recycling operation, which is expected to benefit from our expanded SCPPA contract.”
About ARCA
ARCA is one of the nation’s largest recyclers of major household appliances for the energy conservation programs of electric utilities. Through its ApplianceSmart operation, 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 virtually new appliances at a discount to full retail, offers a 100% money-back guarantee and provides warranties on parts and labor. As of May 2007, ApplianceSmart was operating 15 factory outlets: five in the Minneapolis/St. Paul market; three in the Columbus, Ohio, market; four in the Atlanta market; two in San Antonio, Texas and one in Los Angeles.
# # #
Statements about ARCA’s outlook are forward-looking and involve risks and uncertainties, including but not limited to: the strength of recycling programs, the growth of appliance retail sales, the speed at which individual retail stores reach profitability, and other factors discussed in the Company’s filings with the Securities and Exchange Commission.
Visit our web site at www.arcainc.com
Appliance Recycling Centers of America, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
1st Quarter 2007 Results
(000’s omitted except for share amounts)
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Three Months Ended |
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March 31 |
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April 1 |
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2007 |
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2006 |
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Revenues |
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Retail |
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$ |
17,689 |
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$ |
15,837 |
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Recycling |
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1,894 |
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1,763 |
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Byproduct |
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349 |
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316 |
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Total revenues |
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19,932 |
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17,916 |
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Cost of revenues |
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13,366 |
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12,692 |
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Gross profit |
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6,566 |
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5,224 |
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Selling, General & Administrative Expenses |
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6,742 |
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5,665 |
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Operating income (loss) |
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(176 |
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(441 |
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Other Income (Expense) |
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Other income (expense) |
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2 |
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(3 |
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Interest expense |
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(298 |
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(234 |
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Loss before provision for income taxes |
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(472 |
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(678 |
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Net loss |
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$ |
(472 |
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$ |
(678 |
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Basic loss per common share |
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$ |
(0.11 |
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$ |
(0.16 |
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Diluted loss per common share |
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$ |
(0.11 |
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$ |
(0.16 |
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Basic weighted average no. of common shares outstanding |
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4,341 |
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4,322 |
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Diluted weighted average no. of common shares outstanding |
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4,341 |
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4,322 |
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Appliance Recycling Centers of America, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
As of March 31, 2007
(000’s)
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March 31, |
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December 30, |
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(Unaudited) |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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$ |
3,076 |
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$ |
2,753 |
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Receivables - net of allowance of $152,000 and $152,000 respectively |
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2,091 |
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2,411 |
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Inventories, net of reserves of $153,000 and $207,000 respectively |
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11,342 |
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10,998 |
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Deferred income taxes |
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601 |
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601 |
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Other current assets |
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359 |
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657 |
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Total current assets |
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17,469 |
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17,420 |
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Property and Equipment, at cost |
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Land |
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2,050 |
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2,050 |
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Building and improvements |
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4,695 |
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4,696 |
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Equipment |
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6,972 |
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6,889 |
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13,717 |
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13,635 |
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Less accumulated depreciation |
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7,768 |
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7,575 |
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Net property and equipment |
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5,949 |
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6,060 |
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Other assets |
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429 |
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433 |
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Total Assets |
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$ |
23,847 |
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$ |
23,913 |
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Liabilities and Shareholders’ Equity |
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Current Liabilities |
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Line of credit |
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$ |
6,802 |
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$ |
6,872 |
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Current maturities of long term obligations |
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315 |
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309 |
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Accounts payable |
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3,592 |
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3,198 |
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Accrued expenses |
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4,093 |
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3,957 |
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Income taxes payable |
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58 |
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58 |
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Total current liabilities |
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14,860 |
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14,394 |
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Long-Term Obligations, less current maturities |
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4,705 |
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4,776 |
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Deferred Income Tax Liabilities |
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601 |
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601 |
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Total Liabilities |
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20,166 |
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19,771 |
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Shareholders’ Equity |
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Common stock, no par value; authorized 10,000,000 shares; issuedand outstanding 4,341,000 and 4,341,000 shares respectively |
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14,981 |
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14,970 |
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Accumulated deficit |
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(11,300 |
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(10,828 |
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Total Shareholders’ Equity |
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3,681 |
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4,142 |
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Total Liabilities and Shareholders’ Equity |
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$ |
23,847 |
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$ |
23,913 |
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