Exhibit
99.1
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Appliance Recycling Centers of
America, Inc.
7400
Excelsior Boulevard, Minneapolis MN 55426 (952) 930-9000
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FOR IMMEDIATE RELEASE
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FOR MORE INFORMATION, CONTACT:
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Edward R. (Jack) Cameron, CEO, or
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Peter Hausback, EVP and CFO
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(952) 930-9000
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Appliance Recycling Centers of America Reports Strong Third Quarter
Operating Results
Earnings Per Share of $0.25
MINNEAPOLIS—October 29,
2008—Appliance Recycling Centers of America, Inc. (NASDAQ: ARCI) today
reported operating results for the third quarter ended September 27, 2008.
Highlights
for this period include:
· Total revenues increased 8.1% to $29.6
million.
· Pre-tax earnings of $1.7 million for the
third quarter of 2008.
· New ApplianceSmart outlet opened in San
Antonio market.
· Two new leases signed for ApplianceSmart
outlets in Rochester, Minn., and Marietta, Ga.
· New recycling facility opened in Springfield,
Ill.
· Three new appliance recycling contracts
announced.
· Agreement signed to become the exclusive
North American distributor for UNTHA Recycling Technology (URT).
· ApplianceSmart comparable store sales
declined only 1.8% despite a difficult macroeconomic environment.
Third
Quarter Financial Overview
Total
revenues for the third quarter of 2008 increased 8.1% to $29.6 million, from
$27.4 million in the comparable period of 2007. The consolidated gross profit
for the third quarter of 2008 was 34%, which was consistent with the third
quarter of 2007. Operating income of $2.0 million increased 8.0% from $1.8
million during the same period last year. ARCA also generated net income of $1.1
million or $0.25 per diluted share in the third quarter of 2008 compared to
$1.4 million or $0.31 per diluted share in the third quarter of 2007. Earnings
for the third quarter of 2008 included a tax provision based on an
-more-
effective
income tax rate of 33% or $566,000 compared to an effective income tax rate of
4% or $65,000 for the third quarter of 2007. The increase in tax expense in the
third quarter of 2008 is related to income generated from ARCA’s U.S. and
Canadian operations. During the third quarter of 2008, ARCA revised its 2008
annual effective rate upward to reflect the company’s expectation, based on its
current quarterly results, that its U.S. federal net operating losses will be
fully utilized. Earnings in the third
quarter of 2008 also included non-cash stock compensation expense of $181,000
or $0.04 per diluted share (pre-tax) compared to $35,000 or $0.01 per diluted
share (pre-tax) in the third quarter of 2007.
Comparable
store sales of the fourteen ApplianceSmart factory outlets that were open
during the complete third quarters of 2008 and 2007 declined 1.8% while total
retail sales rose 7.5% to $18.9 million on a year-over-year basis, reflecting
the impact of three factory outlets opened over the past year.
Third
quarter revenue in ARCA’s recycling segment increased 9.3% to $10.7 million
from the comparable period of 2007. The
increase was primarily due to generating more byproduct revenue.
Year-to-Date
2008 Financial Results
Total
revenues for the first nine months of 2008 increased 22.0% to $85.3 million
from $69.9 million in the comparable period of 2007. Operating income of $3.8
million increased 34.0% from $2.9 million during the same period last year. The
company generated net income of $2.1 million or $0.45 per diluted share for the
nine months ended September 27, 2008 compared to $1.8 million or $0.40 per
diluted share in the previous year. This represented an 18.5% increase in
earnings. Earnings for the first nine months of 2008 were based on applying an
effective income tax rate of 26% compared to an effective income tax rate of 4%
for the same period last year. The 2008 year-to-date earnings included non-cash
stock compensation expense of $419,000 or $0.09 per diluted share (pre-tax)
compared to $72,000 or $0.02 per fully diluted share (pre-tax) for the same
period last year.
Year-to-date
comparable store sales of the fourteen ApplianceSmart factory outlets operating
during the entire first, second and third quarters of 2008 and 2007 increased
2.6%.
Edward
R. (Jack) Cameron, President and Chief Executive Officer, commented: “Overall
the third quarter was solid for the company, especially in light of the
difficult economic environment in which we are operating. Unlike most appliance
retailers, ApplianceSmart is continuing to prosper despite
-more-
ongoing
weakness in the nation’s residential construction sector. We believe our third
quarter and year-to-date results reflect the benefits of ApplianceSmart’s
strong value proposition and strategic focus on the appliance replacement and
home remodeling market.
“Our
sales results for the quarter were in line with our expectations and reflect
the realities of the continuing macroeconomic pressures on our industry,”
commented Cameron. “In a challenging environment that finds many of our
competitors retrenching, we continue to grow with plans to open additional
ApplianceSmart retail outlets in strategic locations with compelling rent
structures. Each planned location will be situated in an existing ApplianceSmart
market, which allows us to continue to leverage our advertising dollars and
general and administrative costs. We are encouraged by our results and our
continued market share gains, but the macroeconomic factors pressuring
consumers and the ongoing challenges and uncertainty of financial markets
suggest that a cautious sales outlook for the balance of fiscal 2008 is
prudent. We remain focused on positioning the company for long-term success
while managing through the near-term challenges of the current environment.”
In
July, ARCA entered into an agreement to become 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.
In addition to marketing these systems to the recycling industry, ARCA intends
to install a URT system at one of its higher volume appliance recycling
facilities, where the system will treat entire refrigerators and separate
metals, plastic and de-gassed polyurethane foam insulation into streams of fine
and uniformly sized granules. By yielding a finer grade of steel, copper, aluminum
and plastic, the URT system will enable ARCA to generate significantly greater
revenues from the sales of these byproducts to metal recyclers.
About
ARCA
ARCA
(www.arcainc.com) is one of the nation’s largest recyclers of major household
appliances for the energy conservation programs of electric utilities. Through
its ApplianceSmart operation (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
-more-
these
new appliances at a discount to full retail, offers a 100% money-back guarantee
and provides warranties on parts and labor. As of October 2008,
ApplianceSmart was operating 17 factory outlets: six in the Minneapolis/St.
Paul market; four in the Columbus, Ohio, market; four in the Atlanta market;
and three in San Antonio, Texas. The Company previously announced that it will
be opening its fifth retail outlet in the Atlanta market in November 2008
and a seventh greater Minneapolis retail outlet in Rochester, Minn., which will
bring the total count of ApplianceSmart stores to nineteen.
# # #
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.
-more-
Appliance
Recycling Centers of America, Inc. and Subsidiaries
Unaudited
Consolidated Statements of Operations:
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Three months ended
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Nine months ended
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September 27,
2008
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September 29,
2007
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September 27,
2008
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September 29,
2007
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Revenues:
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Retail
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$
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18,871,000
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$
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17,561,000
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$
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59,004,000
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$
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53,993,000
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Recycling
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8,793,000
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9,035,000
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22,026,000
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14,282,000
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Byproduct
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1,931,000
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774,000
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4,229,000
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1,609,000
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Total revenues
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29,595,000
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27,370,000
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85,259,000
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69,884,000
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Costs of revenue
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19,463,000
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18,078,000
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57,462,000
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46,051,000
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Gross profit
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10,132,000
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9,292,000
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27,797,000
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23,833,000
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Selling, general
and administrative expenses
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8,152,000
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7,459,000
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23,959,000
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20,969,000
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Operating income
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1,980,000
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1,833,000
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3,838,000
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2,864,000
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Other income
(expense):
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Interest
expense, net
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(316,000
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(376,000
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(1,038,000
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(998,000
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Other expenses,
net
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33,000
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12,000
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31,000
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(33,000
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Income before
provision for income taxes
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1,697,000
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1,469,000
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2,831,000
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1,833,000
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Provision for
income taxes
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556,000
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65,000
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736,000
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65,000
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Net income
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$
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1,141,000
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$
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1,404,000
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$
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2,095,000
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$
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1,768,000
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Net income per
share:
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Basic
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$
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0.25
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$
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0.32
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$
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0.46
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$
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0.40
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Diluted
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$
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0.25
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$
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0.31
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$
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0.45
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$
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0.40
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Weighted average
number of shares outstanding:
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Basic
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4,578,000
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4,409,000
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4,568,000
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4,368,000
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Diluted
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4,608,000
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4,511,000
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4,622,000
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4,438,000
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Selected Consolidated Balance
Sheet Data:
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September 27,
2008
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December 29,
2007
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(Unaudited)
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Cash and cash
equivalents
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$
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3,432,000
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$
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2,777,000
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Current assets
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$
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30,764,000
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$
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28,181,000
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Total assets
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$
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38,080,000
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$
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35,532,000
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Line of credit
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$
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13,361,000
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$
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13,585,000
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Total
liabilities
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$
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27,974,000
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$
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28,270,000
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Total
shareholders’ equity
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$
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10,106,000
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$
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7,262,000
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