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 Fourth Quarter and Full
Year 2008 Results
MINNEAPOLIS—March 5,
2009—Appliance
Recycling Centers of America, Inc. (NASDAQ: ARCI) today reported operating
results for the fourth quarter and year ended January 3, 2009.
Highlights
for the full year include:
· Total
revenue increase of 11.2% to $111.0 million for 2008.
· Pre-tax
earnings from continuing operations of $2.6 million for 2008.
· Four
new ApplianceSmart Factory Outlet openings in Rochester and Rogers, Minn.,
Marietta, Ga., and San Antonio, Texas.
· Expansion
of the appliance recycling business with the addition of a new recycling
facility in Springfield, Ill., to service two utility companies.
· Signing
of an agreement to become the exclusive North American distributor for UNTHA
Recycling Technology (URT).
· A
strategic decision during the fourth quarter of 2008 to discontinue the operations
of two subsidiaries comprising a component of our business that negatively impacted
2008 earnings by $1.5 million, net of taxes, in order to better position the
Company for the future.
Fourth
Quarter Financial Overview
Total
revenues for the fourth quarter of 2008 decreased 14.5% to $26.2 million, from
$30.6 million in the comparable period of 2007. The consolidated gross profit
for the fourth quarter of 2008 was 30%, which was consistent with the fourth
quarter of 2007. The Company had an operating loss of $0.3 million compared to $1.6
million of operating income during the same period last year. ARCA also incurred
a loss from continuing operations of $0.7 million or $0.14 per diluted share in
the fourth
-more-
quarter
of 2008 compared to income from continuing operations of $1.0 million or $0.22
per diluted share in the fourth quarter of 2007.
During
the fourth quarter of 2008, the Company made a strategic decision to
discontinue its North American Appliance Company (“NAACO”) and Productos
Duraderos de Norte America (“PDN”) operations and dispose of the assets. NAACO
and PDN were not operating as originally planned and were no longer
economically viable. In 2008, the Company’s supply of window air conditioners
from a major manufacturer was depleted and no longer providing refurbishment
opportunities for PDN and revenues for NAACO, which was the basis for our
investment in these two businesses. All results of operations for periods
presented prior to the abandonment date have been reclassified as discontinued
operations. The Company recorded a loss on the disposal of the NAACO and
PDN operations of $0.7 million, net of taxes, for the quarter ended January 3,
2009.
The
overall impact on earnings of the discontinued operations in the fourth quarter
of 2008 was a loss of $1.1 million, net of taxes. This overall loss is
comprised of a $0.4 million loss from the discontinued operations, net of taxes,
combined with a $0.7 million loss on the disposal of the discontinued
operations, net of taxes. Earnings in the fourth quarter of 2008 also included pre-tax
non-cash stock compensation expense of $110,000 or $0.02 per diluted share compared
to $35,000 or $0.01 per diluted share in the fourth quarter of 2007.
Comparable
store sales of the fourteen ApplianceSmart Factory Outlets that were open
during the complete fourth quarters of 2008 and 2007 declined 16.7%, while
total retail sales declined 5.7% to $17.6 million on a year-over-year basis.
The quarter-over-quarter decline is primarily the result of two factors: 1) the
fourth quarter of 2007 was positively impacted by a large close-out purchase
from a major manufacturer that resulted in very strong customer demand. This
purchasing opportunity did not exist in the fourth quarter of 2008, and 2) the
overall retail economy had one of its worst quarters since the Great Depression
as a result of the nationwide recession and cutback in consumer spending.
Fourth
quarter revenue in ARCA’s recycling segment decreased 28.3% to $8.6 million
from $12.0 million in the comparable period of 2007. The decrease was due primarily
to lower revenues in the Canadian market in the fourth quarter of 2008 compared
to the same period in 2007 because of high appliance volumes during the recycling
program’s kick-off period during the second half of 2007. Additionally, the
decline in the Canadian dollar resulted in a $0.5 million decline in revenues
-more-
translated
to the U.S. dollar due to impact of the foreign currency exchange rate. While
byproduct revenue remained flat in the fourth quarter of 2008 compared to the
same quarter of 2007, scrap metal prices decreased significantly during the
fourth quarter compared to the first three quarters of 2008. The Company
expects that scrap metal prices will stay at depressed prices throughout 2009.
2008
Financial Results
Total
revenues for 2008 increased 11.2% to $111.0 million from $99.8 million in 2007.
Operating income of $4.0 million decreased 2.6% from $4.1 million in 2007. The Company
generated income from continuing operations of $1.9 million or $0.41 per
diluted share for 2008 compared to $2.5 million or $0.55 per diluted share for
the previous year. The overall impact of the NAACO and PDN discontinued
operations for 2008 was a loss of $1.5 million, net of taxes, comprised of a
$0.8 million loss from the discontinued operations, net of taxes, and a $0.7
million loss on the disposal of the assets, net of taxes. Discontinuing these
operations will preclude further operating losses from these two businesses. The
2008 earnings included pre-tax non-cash stock compensation expense of $0.5
million or $0.11 per diluted share compared to $0.1 million or $0.02 per fully
diluted share for the same period last year.
Comparable
store sales of the fourteen ApplianceSmart Factory Outlets operating during the
entire years of 2008 and 2007 decreased 2.5%, while total store sales increased
5.9% to $76.2 million due to opening four new factory outlets during 2008. Revenues
from ARCA’s recycling segment increased 24.9% in 2008 to $34.8 million compared
to $27.9 million in 2007. The increase was due primarily to higher recycling
volumes in Canada and, to a lesser extent, higher scrap metal prices during the
first three quarters of 2008. The increase in tax expense for the full year of
2008 is related primarily to increases in income generated from ARCA’s Canadian
operations. Net income for the year was $0.4 million or $.08 per diluted share
compared to $2.5 million or $.57 per share for 2007.
Edward
R. (Jack) Cameron, President and Chief Executive Officer, commented: “Clearly
the fourth quarter of 2008 was a very challenging period for our retail outlet
stores as a result of one of the worst economic recessions in the past fifty
years. We believe that the strong value proposition and wide breadth of choices
we are able to offer our retail customers prevented our sales from being down
even further. As previously communicated, we completed the planned openings of
three new ApplianceSmart Factory Outlets in strategic locations with compelling
rent structures during the fourth
-more-
quarter.
These new retail outlets will allow us to continue to leverage our advertising
dollars and general and administrative expenses.
“For
our appliance recycling business, we feel good overall about our operating
results in both the fourth quarter and the full year of 2008. Nationwide, we
are seeing a significant increase in utility companies including appliance
recycling programs as part of their energy efficiency initiatives. We believe
we are well positioned to leverage new opportunities in the coming year and are
confident our appliance recycling business will continue to grow.”
ARCA
has 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 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. 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
(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 March 2009,
ApplianceSmart was operating 20 factory outlets: six
-more-
in
the Minneapolis/St. Paul market; one in Rochester, Minn., market, four in the
Columbus, Ohio, market; six in the Atlanta market; and three in San Antonio,
Texas.
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
Consolidated
Statements of Operations
(In
thousands, except per share data)
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Three months ended
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Twelve months ended
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January 3,
2009
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December 29,
2007
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January 3,
2009
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December 29,
2007
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Revenues:
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Retail
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$
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17,621
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$
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18,679
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$
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76,179
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$
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71,904
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Recycling
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7,637
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10,906
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29,628
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25,188
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Byproduct
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935
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1,053
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5,164
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2,662
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Total revenues
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26,193
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30,638
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110,971
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99,754
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Costs of revenue
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18,452
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21,545
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75,361
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67,243
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Gross profit
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7,741
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9,093
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35,610
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32,511
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Selling, general
and administrative expenses
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7,998
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7,500
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31,575
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28,369
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Operating income
(loss)
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(257
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)
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1,593
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4,035
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4,142
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Other income
(expense):
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Interest
expense, net
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(337
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)
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(433
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)
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(1,377
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)
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(1,450
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)
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Other expenses,
net
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(63
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)
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(40
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)
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(55
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)
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(53
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)
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Income (loss)
from continuing operations before provision for income taxes
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(657
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)
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1,120
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2,603
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2,639
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Provision
(benefit) for income taxes
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3
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98
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739
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163
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Income (loss)
from continuing operations
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(660
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)
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1,022
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1,864
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2,476
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Income (loss)
from discontinued operations, net of income tax
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(383
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)
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(251
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)
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(812
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)
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63
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Loss on disposal
of discontinued operations, net of income tax
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(692
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)
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—
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(692
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)
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—
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Net income
(loss)
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$
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(1,735
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)
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$
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771
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$
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360
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$
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2,539
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Basic income
(loss) per share:
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Continuing
operations
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$
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(0.14
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)
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$
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0.23
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$
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0.41
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$
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0.56
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Discontinued
operations
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(0.24
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)
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(0.06
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)
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(0.33
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)
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0.02
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Net income
(loss)
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$
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(0.38
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)
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$
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0.17
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$
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0.08
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$
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0.58
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Diluted income
(loss) per share:
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Continuing
operations
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$
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(0.14
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)
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$
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0.22
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$
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0.41
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$
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0.55
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Discontinued
operations
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(0.24
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)
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(0.05
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)
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(0.33
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)
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0.02
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Net income
(loss)
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$
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(0.38
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)
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$
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0.17
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$
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0.08
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$
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0.57
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Weighted average
number of common shares outstanding:
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Basic
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4,578
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4,495
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4,571
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4,400
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Diluted
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4,578
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4,582
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4,612
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4,475
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-more-
Selected
Consolidated Balance Sheet Data
(In
thousands)
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January 3,
2009
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December 29,
2007
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Cash and cash
equivalents
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$
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3,498
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$
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2,777
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Current assets
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$
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29,786
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$
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28,181
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Total assets
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$
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37,415
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$
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35,532
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Line of credit
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$
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14,527
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$
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13,585
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Total
liabilities
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$
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29,426
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$
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28,270
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Total
shareholders’ equity
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$
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7,989
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$
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7,262
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-end-