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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Appliance Recycling Centers of
America Reports Third Quarter
Operating Results
MINNEAPOLIS—NOVEMBER 9, 2009—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
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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
-more-
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.
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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.”
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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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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 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.
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APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
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Three Months Ended
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Nine Months Ended
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October 3,
2009
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September 27,
2008
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October 3,
2009
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September 27,
2008
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Revenues:
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Retail
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$
|
17,962
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$
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18,724
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$
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58,229
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$
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58,558
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Recycling
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7,006
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8,759
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16,942
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21,991
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Byproduct
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1,037
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1,931
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2,384
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4,229
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|
Total revenues
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26,005
|
|
29,414
|
|
77,555
|
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84,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues
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|
17,512
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|
19,252
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|
55,148
|
|
56,909
|
|
|
Gross profit
|
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8,493
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|
10,162
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|
22,407
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|
27,869
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|
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Selling, general and administrative expenses
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7,638
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8,017
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23,378
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23,577
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Operating income (loss)
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855
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2,145
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(971
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)
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4,292
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|
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|
|
|
|
|
|
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Other income (expense):
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|
|
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|
|
|
|
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Interest expense, net
|
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(325
|
)
|
(316
|
)
|
(900
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)
|
(1,040
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)
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Other expenses, net
|
|
36
|
|
8
|
|
(35
|
)
|
8
|
|
|
Income (loss) from continuing operations before
income taxes
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|
566
|
|
1,837
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|
(1,906
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)
|
3,260
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|
|
Provision for income taxes
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|
150
|
|
560
|
|
51
|
|
736
|
|
|
Income (loss) from continuing operations
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|
416
|
|
1,277
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|
(1,957
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)
|
2,524
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|
|
Loss from discontinued operations, net of tax
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—
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(136
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)
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—
|
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(429
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)
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Net income (loss)
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|
$
|
416
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|
$
|
1,141
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|
$
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(1,957
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)
|
$
|
2,095
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|
|
|
|
|
|
|
|
|
|
|
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Basic income (loss) per share:
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|
|
|
|
|
|
|
|
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Continuing operations
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|
$
|
0.09
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|
$
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0.28
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|
$
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(0.43
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)
|
$
|
0.55
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|
|
Discontinued operations
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—
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(0.03
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)
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—
|
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(0.09
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)
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Net income (loss)
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|
$
|
0.09
|
|
$
|
0.25
|
|
$
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(0.43
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)
|
$
|
0.46
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|
|
|
|
|
|
|
|
|
|
|
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Diluted income (loss) per share:
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|
|
|
|
|
|
|
|
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Continuing operations
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|
$
|
0.09
|
|
$
|
0.28
|
|
$
|
(0.43
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)
|
$
|
0.54
|
|
|
Discontinued operations
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|
—
|
|
(0.03
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)
|
—
|
|
(0.09
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)
|
|
Net income (loss)
|
|
$
|
0.09
|
|
$
|
0.25
|
|
$
|
(0.43
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)
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
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Weighted average number of shares outstanding:
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|
|
|
|
|
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Basic
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4,578
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|
4,578
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|
4,578
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|
4,568
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|
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Diluted
|
|
4,578
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|
4,608
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|
4,578
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|
4,622
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APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
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October 3,
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January 3,
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2009
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2009
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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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$
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2,707
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$
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3,498
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Accounts receivable, net of allowance of $39 and
$292, respectively
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5,589
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|
6,056
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Inventories, net of reserves of $360 and $115,
respectively
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|
17,979
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|
18,834
|
|
|
Other current assets
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|
687
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|
950
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Deferred income taxes
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|
448
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|
448
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|
Total current assets
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|
27,410
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|
29,786
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Property and equipment, net
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4,321
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|
6,967
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Deferred income taxes
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|
199
|
|
177
|
|
|
Restricted cash
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|
700
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|
—
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Other assets
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|
753
|
|
485
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|
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Total assets
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|
$
|
33,383
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|
$
|
37,415
|
|
|
|
|
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|
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Liabilities and Shareholders’ Equity
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|
|
|
|
|
|
Current liabilities:
|
|
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|
|
|
|
Accounts payable
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|
$
|
4,933
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|
$
|
4,473
|
|
|
Checks issued in excess of bank balance
|
|
516
|
|
—
|
|
|
Accrued expenses
|
|
4,602
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|
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
|
|
|
|
|
|
|
|
|
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Commitments and contingencies
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|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
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
|
|